tag:theconversation.com,2011:/global/topics/national-electricity-market-2810/articlesNational Electricity Market – The Conversation2024-03-19T06:21:50Ztag:theconversation.com,2011:article/2260202024-03-19T06:21:50Z2024-03-19T06:21:50ZFinally, good news for power bills: energy regulator promises small savings for most customers on the ‘default market offer’<figure><img src="https://images.theconversation.com/files/582732/original/file-20240319-16-nu9kfi.jpg?ixlib=rb-1.1.0&rect=67%2C8%2C5540%2C3724&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/queensland-australia-common-public-substations-1062133949">chinasong, Shutterstock</a></span></figcaption></figure><p>Electricity customers in four Australian states can breathe a sigh of relief. After two years in a row of 20% <a href="https://theconversation.com/why-are-electricity-prices-going-up-again-and-will-it-ever-end-201869">price increases</a>, power prices have finally stabilised. In many places they’re going down. </p>
<p>The good news is contained in two separate draft decisions today by the <a href="https://www.aer.gov.au/news/articles/news-releases/default-market-offer-dmo-2024-25-draft-determination">Australian Energy Regulator</a> and Victoria’s <a href="https://www.esc.vic.gov.au/electricity-and-gas/prices-tariffs-and-benchmarks/victorian-default-offer/victorian-default-offer-price-review-2024-25">Essential Services Commission</a>, on the maximum price energy retailers can charge electricity consumers under a specific plan that must be offered to all consumers.</p>
<p>The price is officially known as the “<a href="https://www.dcceew.gov.au/energy/programs/price-safety-net">default market offer</a>”. It’s the price you’re charged on a “default” plan with an electricity retailer – in other words, the plan customers are on if they haven’t shopped around to find a better deal from competing retailers. The bottom line is, most of these residential electricity customers should receive price reductions of between 0.4% (A$13) and 7.1% ($211) next financial year. In most cases that’s less than the rate of inflation. </p>
<p>The relief is largely the result of a drop in <a href="https://theconversation.com/wholesale-power-prices-are-falling-fast-but-consumers-will-have-to-wait-for-relief-heres-why-222495">wholesale prices</a> – that’s the price paid to the generators producing electricity. Unfortunately, however, at the same time transmission and distribution prices – or network costs – have gone up. So the savings won’t be as great as they might have been. </p>
<p><iframe id="4DAld" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/4DAld/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<h2>A big improvement on previous years</h2>
<p>This is the sixth year in which regulators have set default market offers for retail electricity customers. They do it where there is competition in the sector: so in southeast Queensland, New South Wales, South Australia and, separately, Victoria. </p>
<p>It does not include Tasmania, the ACT, Western Australia or the Northern Territory, where the relevant regulator sets the prices and there’s no or very little competition.</p>
<p>About 5-10% of consumers across the states involved are on default plans. The rest have a contract arrangement with a retailer. But the draft decision, if enacted, still directly affects hundreds of thousands of people. And as commentators <a href="https://www.abc.net.au/news/2024-03-19/aer-flags-price-cuts-for-some-rises-for-others/103602946">have observed</a>, it sends an important market signal about the general direction of electricity prices.</p>
<p>The Australian Energy Regulator says most residential customers on the default market offer can expect to save on their electricity bills in 2024-25. But the offers vary depending where you live. </p>
<p>Have a look at the table above to see what residential customers without “controlled load” can expect. That covers most households. (Controlled load is when you also have an off-peak tariff for hot water heating.)</p>
<p>Some customers will be paying more for electricity. In Southeast Queensland, residential customers will pay 2.7% more, which is an extra $53 on average. </p>
<p>Using an inflation forecast of 3.3%, the Australian Energy Regulator also calculates what they call the “real” year-to-year variation in prices. So even if there’s a small increase in the price for a particular area, it’s less than the rate of inflation. For that example in southeast Queensland, it equates to a decrease of 0.6% and a saving of $12 in real terms. </p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1769841169851408797"}"></div></p>
<p>Residential customers on the <a href="https://www.esc.vic.gov.au/electricity-and-gas/prices-tariffs-and-benchmarks/victorian-default-offer">Victorian default market offer</a> can expect to save 6.4%. The retail power prices in Victoria are <a href="https://www.afr.com/companies/energy/power-bill-relief-could-be-coming-as-wholesale-electricity-prices-fall-20240130-p5f14e">slightly better than in the other states</a> largely because there are lower wholesale power prices.</p>
<p>All in all it’s a big improvement on the price hikes of <a href="https://theconversation.com/why-are-electricity-prices-going-up-again-and-will-it-ever-end-201869">last year</a> and the year before that. </p>
<p>The final default market offer prices will be released in May, but we can expect little change. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-government-will-underwrite-risky-investments-in-renewables-heres-why-thats-a-good-idea-218427">The government will underwrite risky investments in renewables – here's why that's a good idea</a>
</strong>
</em>
</p>
<hr>
<p><iframe id="a1H3J" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/a1H3J/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<h2>Network prices are up</h2>
<p>Regulators set the default market offer by itemising all costs retailers are likely to incur in the course of running their business. From that, they calculate the fair price retailers should offer customers on default plans. </p>
<p>Wholesale electricity costs, incurred when retailers buy electricity from generators on the wholesale market, make up <a href="https://www.energyfactsaustralia.org.au/key-issues/energy-costs/">maybe 30–40% of your bill</a>. </p>
<p>The other major cost retailers face is for the electricity transmission and distribution network – that is, the “poles and wires”. These also comprise around 40% of your bill.</p>
<p>The network price is driven by inflation and interest rate rises, and also includes the costs of maintenance, and building new transmission infrastructure to connect renewable energy generators to the grid.</p>
<p>The easing of wholesale prices since their 2022 peak has been offset by increases in these network prices. In fact, network prices have increased by almost as much as wholesale prices have come down. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/wholesale-power-prices-are-falling-fast-but-consumers-will-have-to-wait-for-relief-heres-why-222495">Wholesale power prices are falling fast – but consumers will have to wait for relief. Here's why</a>
</strong>
</em>
</p>
<hr>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1769924380493312063"}"></div></p>
<h2>A difficult ask</h2>
<p>Responding to the draft decision on Tuesday, Federal Energy Minister Chris Bowen <a href="https://minister.dcceew.gov.au/bowen/media-releases/albanese-government-energy-plan-stabilising-energy-prices-after-global-crisis">said</a> it showed the Albanese government was stabilising energy prices.</p>
<p>But Bowen came to office promising to <a href="https://www.chrisbowen.net/media/media-releases-and-op-eds/powering-australia-labor-s-plan-to-create-jobs-cut-power-bills-and-reduce-emissions-by-boosting-renewable-energy/">cut power bills by $275 by 2025</a>. That deadline is not very far away.</p>
<p>Bowen made that commitment in December 2021. Very soon after, <a href="https://theconversation.com/electricity-prices-are-spiking-ten-times-as-much-as-normal-here-are-some-educated-guesses-as-to-why-182849">electricity prices</a> shot through the roof. It’s becoming very difficult to see how the $275 cost reduction will be achieved by next year. </p>
<p>The bottom line is prices have stabilised after a couple of bad years and hopefully the worst is behind us. But, it would be a brave person who attempts to predict where they go from here. There are too many moving parts. Governments should stay the course on policies, and consumers, worried about electricity prices, should go online, compare offers, and to find the best possible deal.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/unsexy-but-vital-why-warnings-over-grid-reliability-are-really-about-building-more-transmission-lines-212603">Unsexy but vital: why warnings over grid reliability are really about building more transmission lines</a>
</strong>
</em>
</p>
<hr>
<img src="https://counter.theconversation.com/content/226020/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Tony Wood may have interests in companies impacted by the energy transition through his superannuation fund.</span></em></p>In states with competition between retailers, the energy regulator is promising savings for most customers on the default plan. But it’s small change compared to price hikes. Here’s what to expect.Tony Wood, Program Director, Energy, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2253462024-03-17T19:01:24Z2024-03-17T19:01:24ZSmart meters haven’t delivered the promised benefits to electricity users. Here’s a way to fix the problems<figure><img src="https://images.theconversation.com/files/582098/original/file-20240315-18-3y4x18.jpg?ixlib=rb-1.1.0&rect=0%2C311%2C3642%2C2419&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/close-modern-smart-grid-residential-digital-108664646">Pi-Lens/Shutterstock</a></span></figcaption></figure><p><a href="https://www.mordorintelligence.com/industry-reports/advanced-metering-infrastructure-market">Billions of dollars</a> are being spent worldwide to modernise electricity grids with smart meters. These meters promise to save households money by making it easier for us to understand and manage our energy use. However, our <a href="https://www.cell.com/cell-reports-physical-science/fulltext/S2666-3864(24)00055-9">new research</a> suggests these promises might not be fully delivered due to a lack of access to high-resolution, real-time energy data.</p>
<p>Smart meters are the enabling technology of modern smart electricity grids. Smart grids can use digital technology to fine-tune the management of electricity supply and demand. This ensures the grid can deliver low-cost and reliable power. </p>
<p>Countries like Australia are racing to install smart meters extensively. Last year the Australian Energy Market Commission <a href="https://www.aemc.gov.au/sites/default/files/2023-08/emo0040_-_metering_review_-_final_report.pdf">recommended</a> a goal of 100% uptake among small customers by 2030. In response, an Australian Energy Council <a href="https://www.energycouncil.com.au/analysis/rushing-to-the-finish-line-can-we-clear-the-hurdles-on-the-way-to-100-smart-meters-by-2030/">article</a> suggested these meters aren’t living up to their potential. </p>
<p>This isn’t just an Australian problem – it’s a global challenge. <a href="https://www.cell.com/cell-reports-physical-science/fulltext/S2666-3864(24)00055-9">Our research</a> offers a solution to unleash the promised benefits of smart meters at least cost. From improving data transmission to protecting our privacy, there’s a lot we can do to make our energy systems smarter and fairer for everyone.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1117998554998554625"}"></div></p>
<h2>Why do we need a truly smart grid?</h2>
<p>Our demand for electricity is set to soar as the push to electrify everything gains momentum. The Victorian government, for instance, has <a href="https://www.energy.vic.gov.au/__data/assets/pdf_file/0027/691119/Victorias-Gas-Substitution-Roadmap-Update.pdf">banned gas in new homes</a> from 2024. </p>
<p>The International Energy Agency <a href="https://www.weforum.org/agenda/2024/02/green-energy-electricity-demand-growth-iea-report/">forecasts a 3.4% annual rise</a> in electricity consumption from 2024 to 2026. As transportation electrifies, electricity’s share could increase <a href="https://www.irena.org/Energy-Transition/Technology/Transport">from 1% in 2018 to 49% by 2050</a>.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/cooking-and-heating-without-gas-what-are-the-impacts-of-shifting-to-all-electric-homes-210649">Cooking (and heating) without gas: what are the impacts of shifting to all-electric homes?</a>
</strong>
</em>
</p>
<hr>
<p>To meet this growing demand while cutting carbon emissions, we must ramp up renewable energy production. However, the unpredictable nature of wind and solar power presents challenges for the grid.</p>
<p>To manage highly variable supply and demand, we need to digitise our grid. Advanced technologies such as sensors, machine-learning algorithms and cloud computing will enable us to optimise electricity generation, distribution and consumption. </p>
<p>Smart meters are the cornerstone of such a system. They can provide the detailed, real-time data needed for smart grid applications. </p>
<p>Smart meter deployment has surged globally. The smart meter market is <a href="https://www.mordorintelligence.com/industry-reports/advanced-metering-infrastructure-market">forecast</a> to grow from US$17.5 billion ($A26.6 billion) in 2024 to US$31.8 billion by 2028.</p>
<p><a href="https://www.cell.com/cell-reports-physical-science/fulltext/S2666-3864(24)00055-9">Our research</a> sheds light on this global deployment and its significant challenges. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/582087/original/file-20240314-24-3y4x18.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/582087/original/file-20240314-24-3y4x18.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/582087/original/file-20240314-24-3y4x18.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=374&fit=crop&dpr=1 600w, https://images.theconversation.com/files/582087/original/file-20240314-24-3y4x18.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=374&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/582087/original/file-20240314-24-3y4x18.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=374&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/582087/original/file-20240314-24-3y4x18.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=471&fit=crop&dpr=1 754w, https://images.theconversation.com/files/582087/original/file-20240314-24-3y4x18.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=471&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/582087/original/file-20240314-24-3y4x18.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=471&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">A summary of the rollout of smart meters in selected countries. (Data for Australia and US from 2023, Canada, China, Japan and UK from 2022, and Sweden, Estonia and Denmark from 2020. DSO = distribution service operator, IESO = independent electricity system operator)</span>
<span class="attribution"><a class="source" href="https://www.cell.com/cell-reports-physical-science/fulltext/S2666-3864(24)00055-9">Rui Yuan et al 2024</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-nd/4.0/">CC BY-NC-ND</a></span>
</figcaption>
</figure>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/a-successful-energy-transition-depends-on-managing-when-people-use-power-so-how-do-we-make-demand-more-flexible-213079">A successful energy transition depends on managing when people use power. So how do we make demand more flexible?</a>
</strong>
</em>
</p>
<hr>
<h2>What will better data allow us to do?</h2>
<p>Grid modernisation and smart meters came with big promises of saving money for consumers. This hasn’t happened. The reason is that many direct benefits to consumers require high-resolution data – and the required level of fine detail in real time isn’t being provided. </p>
<p>For example, as a direct benefit to consumers, <a href="https://ieeexplore.ieee.org/document/8322199">some machine-learning techniques</a> can help households optimise their energy use by providing insights into exactly how much electricity each appliance is using and when. This information could enable them to lower their electricity bill. These tools can also detect abnormal usage patterns, allowing <a href="https://doi.org/10.1002/int.22876">timely intervention and maintenance</a> of faulty appliances. </p>
<p>However, these applications and <a href="https://www.cell.com/cell-reports-physical-science/fulltext/S2666-3864(24)00055-9">other smart grid benefits</a> for consumers all require high-resolution data. </p>
<iframe title="Smart grid applications, data needs and benefits" aria-label="Table" id="datawrapper-chart-ZbaZF" src="https://datawrapper.dwcdn.net/ZbaZF/1/" scrolling="no" frameborder="0" style="border: none;" width="100%" height="600" data-external="1"></iframe>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-national-electricity-market-wasnt-made-for-a-renewable-energy-future-heres-how-to-fix-it-215067">The National Electricity Market wasn't made for a renewable energy future. Here's how to fix it</a>
</strong>
</em>
</p>
<hr>
<h2>What obstacles must be overcome?</h2>
<p>We found three major reasons for the current limitations of smart-metering infrastructure. </p>
<p><em>Data transmission</em> is the first big challenge. High-resolution and more frequent data means a higher volume of numbers, which leads to more delays or disruptions to data transmission. </p>
<p>The second challenge is the <em>data warehousing</em> needed for huge volumes of data. It’s expensive too. </p>
<p>Building and running a data warehouse costs <a href="https://ilsr.org/utilities-customer-data-portability-ler155/">US$19,000–$25,000 per terabyte</a> each year. Upgrading from hourly data to every two seconds requires 1,800 times the storage, at an extra cost of US$36 million! And that’s not counting maintenance, backups, or sharing the data.</p>
<p>The third major issue is <em>data privacy</em>. The data can also be exploited by attackers. They could figure out what appliances you have, your home setup, or even your habits. </p>
<p>This can lead to criminal activities or serious invasion of privacy. For example, people could be tracked based on their vehicle-charging patterns. </p>
<p>Even law enforcement uses electricity data in court cases. One case involved the detection of <a href="https://www.csoonline.com/article/546876/microsoft-subnet-are-smart-meters-real-time-surveillance-spies.html">indoor marijuana growing</a>.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1217580090944622593"}"></div></p>
<h2>A way forward at the cheapest cost</h2>
<p>Ideally, we need a solution that tackles all the issues using the smart meters we already have. <a href="https://www.cell.com/cell-reports-physical-science/fulltext/S2666-3864(24)00055-9">Our solution</a> is based on discovering repeated patterns within electricity usage data, then dividing these data into two parts. </p>
<p>It’s like a book divided into piles of papers and page numbers, with each then handed to different parties. Neither the page alone nor the page numbers make sense until they are combined. </p>
<p>Similarly, we suggest dividing detailed data into smaller patterns called codewords and their daily representations. We’d send only representations to the data centre, letting users keep their codewords to ensure their privacy. </p>
<p>Patterns of energy use often repeat. By using a single codeword to represent multiple days of similar consumption, we can greatly reduce the amount of data that needs to be transmitted. This would cut data communication and warehousing costs. </p>
<p>Continuous research on software, hardware and regulations is needed to refine the proposed framework for the stages of data collection, transmission, storage and analysis. </p>
<p>It’s important for modern energy consumers to be aware that as well as consuming and generating energy (from rooftop solar systems), they also generate data through their smart meters. This data asset is becoming increasingly valuable in the transition to the net-zero era.</p><img src="https://counter.theconversation.com/content/225346/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ali Pourmousavi Kani receives funding from Future Battery Industry Cooperative Research Centre (FBICRC) and Watts AS (from Denmark) for his research. He also has done and is currently involved with consulting jobs that are available in his resume. None are related to the topic of this article. </span></em></p><p class="fine-print"><em><span>Rui Yuan receives funding from the Australian Government Research Training Program and Watts AS (Denmark) for his PhD research. He currently affiliates with Watts AS. </span></em></p>The amount of detailed real-time data a smart grid needs to manage the push for electrification and renewables presents challenges – but there’s an affordable solution.Ali Pourmousavi Kani, Senior Lecturer of Electrical and Mechanical Engineering, University of AdelaideRui Yuan, Industry PhD Candidate, School of Electrical and Mechanical Engineering, University of AdelaideLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2150672024-03-03T19:19:20Z2024-03-03T19:19:20ZThe National Electricity Market wasn’t made for a renewable energy future. Here’s how to fix it<figure><img src="https://images.theconversation.com/files/567029/original/file-20231221-25-f2uwk9.jpg?ixlib=rb-1.1.0&rect=0%2C9%2C6016%2C3998&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/renewable-clean-vs-traditional-energy-concept-1112143700">Trong Nguyen/Shutterstock</a></span></figcaption></figure><p>Rooftop solar is Australia’s <a href="https://www.csiro.au/en/research/technology-space/energy/Energy-data-modelling/GenCost">cheapest source</a> of electricity. The consumer can get electricity from rooftop solar at less than <a href="https://assets-global.website-files.com/612b0b172765f9c62c1c20c9/615a513770739cc6477e67f4_Castles%20and%20Cars%20Rewiring%20Australia%20Discussion%20Paper.pdf">a fifth</a> of the <a href="https://www.canstarblue.com.au/electricity/electricity-costs-kwh/">average cost per kwh</a> of <a href="https://www.aemc.gov.au/sites/default/files/2021-11/2021_residential_electricity_price_trends_report.pdf">buying it from a retailer</a>. </p>
<p>Unsurprisingly, rooftop solar output is <a href="https://www.abc.net.au/news/2024-02-21/rooftop-solar-cells-in-australia-to-outperform-demand/103489806">growing fast</a>. In 2022, <a href="https://apvi.org.au/wp-content/uploads/2023/07/National-Survey-Report-of-PV-Power-Applications-in-AUSTRALIA-2022.pdf">one-in-three</a> homes had solar panels. Total rooftop solar capacity exceeded 30 gigawatts, compared to the <a href="https://aemo.com.au/-/media/files/stakeholder_consultation/consultations/nem-consultations/2023/draft-2024-isp-consultation/draft-2024-isp.pdf">remaining 21GW</a> of coal generation.</p>
<p>Rooftop solar photovoltaic (PV) systems will soon supply half of our electricity demand. At times of the day, they already supply <a href="https://aemo.com.au/-/media/files/stakeholder_consultation/consultations/nem-consultations/2023/draft-2024-isp-consultation/draft-2024-isp.pdf">close to 100%</a> of electricity demand and in some regions can <a href="https://reneweconomy.com.au/australia-has-enough-renewables-to-reach-100pct-at-times-but-coal-gets-in-the-way/">briefly meet all demand</a>.</p>
<p><iframe id="Ppp7A" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/Ppp7A/2/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/despairing-about-climate-change-these-4-charts-on-the-unstoppable-growth-of-solar-may-change-your-mind-204901">Despairing about climate change? These 4 charts on the unstoppable growth of solar may change your mind</a>
</strong>
</em>
</p>
<hr>
<p>This means renewable energy is displacing the electricity traded through the wholesale market and supplied via the transmission system. The National Electricity Market (<a href="https://aemo.com.au/en/energy-systems/electricity/national-electricity-market-nem/about-the-national-electricity-market-nem">NEM</a>) is the wholesale market where large generators and retailers buy and sell electricity to supply the eastern and south-eastern states. It was never designed to cope with large amounts of renewable energy feeding into the grid at large, medium and small scales. </p>
<p>The market’s design doesn’t allow for harnessing the full economic and technical potential of the millions of consumer-owned generators, known as distributed energy resources (DERs). Comprehensive market reforms are <a href="https://www.afr.com/policy/energy-and-climate/energy-distribution-companies-need-radical-reform-report-20240208-p5f3cv">urgently needed</a> to achieve an energy transition at least cost to energy users. </p>
<h2>What are the challenges of reform?</h2>
<p>The National Electricity Market has operated largely in its current form since the 1990s. It was designed for large fossil-fuelled power stations, but many of these are <a href="https://www.theguardian.com/australia-news/2023/dec/15/aemo-warns-coal-fired-power-plants-could-drop-off-before-replacements-are-ready">on the way out</a>.</p>
<p>Millions of rooftop solar systems are now connected to the grid. The market needs to change to a system that can manage and co-ordinate these small renewable energy generators. </p>
<p>To minimise disruption, a reformed market has to be able to accommodate and value the electricity and power system services that these millions of distributed energy resources can provide. They offer flexibility and can help balance supply and demand, thus improving grid stability. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/a-successful-energy-transition-depends-on-managing-when-people-use-power-so-how-do-we-make-demand-more-flexible-213079">A successful energy transition depends on managing when people use power. So how do we make demand more flexible?</a>
</strong>
</em>
</p>
<hr>
<p>Between 2019 and 2023, the <a href="https://www.afr.com/companies/energy/ministers-unplug-energy-security-board-20230519-p5d9ta">former</a> Energy Security Board (<a href="https://www.directory.gov.au/portfolios/climate-change-energy-environment-and-water/department-climate-change-energy-environment-and-water/energy-security-board">ESB</a>) and regulators were tasked with <a href="https://esb-post2025-market-design.aemc.gov.au">delivering a new market design</a> for the clean energy transition. Reforms to better integrate variable renewable generation included:</p>
<ul>
<li><p>improved <a href="https://aemo.com.au/newsroom/news-updates/forecasting-increasingly-critical-to-harnessing-wind-and-solar-for-power-systems">forecasting of electricity demand and supply</a></p></li>
<li><p>the <a href="https://aemo.com.au/en/initiatives/trials-and-initiatives/wholesale-demand-response-mechanism">Wholesale Demand Response Mechanism</a> to allow demand-side (or energy consumer) participation in the market.</p></li>
</ul>
<p>The Energy Security Board also proposed a <a href="https://www.energy.gov.au/government-priorities/energy-ministers/energy-ministers-publications/two-sided-markets">two-sided market</a> to allow energy users to actively trade electricity. The design of the <a href="https://www.energy.gov.au/sites/default/files/2024-02/ESB%20report%20-%20CONSUMER%20ENERGY%20RESOURCES%20AND%20THE%20TRANSFORMATION%20OF%20THE%20NEM.pdf">reform fell short</a>, but the intent remains valid. This reform needs to be revisited. </p>
<p>The electricity market rules define what commodities are valued and traded, how they are to be traded and by whom. These rules are embedded in thousands of pages of <a href="https://www.energy.gov.au/government-priorities/energy-markets/energy-market-legislation">legislation</a>. Each change takes about two years to progress. </p>
<p>These incremental market and policy patches fall short of the systemic change needed for a clean energy future. The whole National Electricity Market and its processes must be redefined. </p>
<p>The current focus of attention is on the large scale. What is being overlooked is the potential of small-scale and local generation to supply electricity where it is needed. This oversight creates a risk of building too much transmission infrastructure at great cost. </p>
<p>The opportunity of energy market reform is that the millions of small, privately owned, behind-the-meter generators could economically provide a big share of Australia’s future electricity and power system services. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/think-of-solar-panels-more-like-apple-trees-we-need-a-fairer-approach-for-what-we-use-and-sell-205751">Think of solar panels more like apple trees – we need a fairer approach for what we use and sell</a>
</strong>
</em>
</p>
<hr>
<figure class="align-center ">
<img alt="Rooftop solar panels on a new development of townhouses" src="https://images.theconversation.com/files/572358/original/file-20240131-19-cz6313.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/572358/original/file-20240131-19-cz6313.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=338&fit=crop&dpr=1 600w, https://images.theconversation.com/files/572358/original/file-20240131-19-cz6313.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=338&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/572358/original/file-20240131-19-cz6313.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=338&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/572358/original/file-20240131-19-cz6313.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=424&fit=crop&dpr=1 754w, https://images.theconversation.com/files/572358/original/file-20240131-19-cz6313.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=424&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/572358/original/file-20240131-19-cz6313.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=424&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A new Sydney townhouse development has solar panels installed on every roof.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/sydney-australia-oct-23-2023-aerial-2378539637">HDC Creative/Shutterstock</a></span>
</figcaption>
</figure>
<h2>Government must lead the transformation</h2>
<p>The clean energy transition is a national priority. Change on this scale requires governments to work together to deliver economic productivity, affordable energy and climate action. </p>
<p>A clear set of principles is needed to guide these changes. The principles from the <a href="https://www.energy.gov.au/sites/default/files/2022-08/National%20Energy%20Transformation%20Partnership.pdf">National Energy Transformation Partnership</a> agreement between federal, state and territory governments are a good place to start. It recognises consumers’ needs as central to the transformation, and that a strong economy depends on affordable, clean and secure energy sources. </p>
<p>The agreement also recognises the role electricity networks and demand-side participation will play in the energy transition. The demand side includes all the small, behind-the-meter, grid-connected, rooftop solar systems and interruptible uses of electricity <a href="https://theconversation.com/using-electric-water-heaters-to-store-renewable-energy-could-do-the-work-of-2-million-home-batteries-and-save-us-billions-204281">such as hot-water systems</a>.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/using-electric-water-heaters-to-store-renewable-energy-could-do-the-work-of-2-million-home-batteries-and-save-us-billions-204281">Using electric water heaters to store renewable energy could do the work of 2 million home batteries – and save us billions</a>
</strong>
</em>
</p>
<hr>
<p>Reforming the electricity market is complex work. It requires an in-depth knowledge of governance and regulatory frameworks, commercial realities and consumer needs. </p>
<p>Putting energy users at the heart of these complex reforms requires a holistic <a href="https://es.catapult.org.uk/guide/systems-thinking-in-the-energy-system/">systems thinking</a> approach to policy and regulatory design. Such an approach takes into account how all parts of a complex system interact. </p>
<p>With the consumer having such a key role, the focus, planning and investment in these smaller energy sources must be on par with that given to the large generators. </p>
<p><a href="https://www.climatecouncil.org.au/resources/what-is-renewable-energy-zone/">Renewable Energy Zones</a> – areas with the greatest potential to develop renewable energy projects – have shown that, with the right policy settings, <a href="https://reneweconomy.com.au/queensland-renewable-energy-zones-flooded-with-60000mw-of-project-proposals-75017/">billions of dollars of investment</a> can be mobilised. The same level of focus on policy settings and market reforms is needed at the small scale of “Community Energy Zones”. </p>
<p>Each zone must be able to accommodate the unique characteristics of its energy users. It must create an investment environment that supports a local ecosystem of skills, trades and community benefit, ultimately leading to a zero-emission community. It must also support technological and business innovation and allow distribution networks to transition to a smart grid at low risk and low cost. </p>
<p>Learning from successful examples overseas such as <a href="https://www.ukri.org/blog/delivering-smart-local-energy-systems/">smart local energy systems</a> (UK) and <a href="https://viablecities.se/en/om/">Viable Cities</a> (Sweden) will be crucial.</p><img src="https://counter.theconversation.com/content/215067/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Vikki McLeod is in receipt of a PhD write-up scholarship from the RACE for 2030 CRC. She has recently commenced a role as energy market reform adviser at Rewiring Australia.
</span></em></p><p class="fine-print"><em><span>Prof. Marcus Foth receives research funding from the Australian Research Council and the RACE for 2030 CRC. He is a member of the Queensland Greens.</span></em></p>Big changes are needed to create a consumer-centric National Electricity Market that’s able to manage the rise of rooftop solar.Vikki McLeod, PhD Graduate, Centre for Clean Energy Technologies and Practices, Queensland University of TechnologyMarcus Foth, Professor of Urban Informatics, Queensland University of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2042812023-06-04T20:04:59Z2023-06-04T20:04:59ZUsing electric water heaters to store renewable energy could do the work of 2 million home batteries – and save us billions<figure><img src="https://images.theconversation.com/files/523358/original/file-20230428-28-izz5as.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C5472%2C3612&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Australia’s energy transition is well under way. Some <a href="https://iea-pvps.org/snapshot-reports/snapshot-2022/">3 million households have rooftop solar</a> and <a href="https://www.theage.com.au/politics/federal/first-past-the-post-evs-race-to-front-in-sales-of-medium-sized-cars-20230420-p5d1yj.html">sales of medium-sized electric cars</a> are surging. But as we work towards fully electric households powered by renewable energy, have we overlooked a key enabling technology, the humble electric water heater?</p>
<figure class="align-right ">
<img alt="a smart electric water heater" src="https://images.theconversation.com/files/529729/original/file-20230602-17-jsaz8u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/529729/original/file-20230602-17-jsaz8u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=800&fit=crop&dpr=1 600w, https://images.theconversation.com/files/529729/original/file-20230602-17-jsaz8u.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=800&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/529729/original/file-20230602-17-jsaz8u.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=800&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/529729/original/file-20230602-17-jsaz8u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1005&fit=crop&dpr=1 754w, https://images.theconversation.com/files/529729/original/file-20230602-17-jsaz8u.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1005&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/529729/original/file-20230602-17-jsaz8u.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1005&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">By storing solar energy as hot water, a smart electric heater can effectively act as a household battery.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<p>About <a href="https://www.energynetworks.com.au/resources/fact-sheets/reliable-and-clean-gas-for-australian-homes-2/">half of Australian households</a> use electric water heaters, while the rest use gas. So what’s so great about electric water heaters? </p>
<p>Electric water heaters offer a cheap way to store large amounts of energy, in the form of hot water. A heater with a 300-litre tank can store about as much energy as a second-generation Tesla Powerwall – at a fraction of the cost. </p>
<p><a href="https://www.uts.edu.au/isf/explore-research/projects/domestic-hot-water-and-flexibility">Our research</a> at the UTS Institute for Sustainable Futures has found Australians could use household electric water heaters to store as much energy as over 2 million home batteries of that kind. This could eventually save over A$6 billion a year on our energy bills while getting us closer to net-zero carbon emissions.</p>
<p><a href="https://www.uts.edu.au/sites/default/files/2023-06/Domestic%20Hot%20Water%20and%20Flexibility.pdf">Our report</a>, published today and funded by the Australian Renewable Energy Agency (ARENA), recommends that, to halve emissions by 2030 and reach net zero by 2050, we urgently need policies to rapidly replace gas water heaters with “smart” electric water heaters. Smart heaters can be switched on and off in response to changes in electricity supply and demand across the grid. </p>
<p>This means these heaters can soak up excess “off-peak” renewable energy, particularly from solar, and so help us solve two key problems at once. They can help reduce and eventually eliminate greenhouse gas emissions. And they can make our electricity grid more stable by providing flexible demand that helps balance out the fluctuating supply from renewable sources.</p>
<h2>Cutting emissions</h2>
<p>There are three main types of electric water heater. A conventional “resistance” heater uses electricity to heat water directly. Solar water heaters use sunlight and electricity, but have become less popular as newer “heat pump” units emerged. These collect heat from the air and “pump” it into water. A heat pump uses three to four times less electricity than a resistance heater. </p>
<p>Back in 2010, a resistance electric water heater typically produced around four times more emissions than its gas equivalent. Heat pump emissions were about the same as for gas. That’s because electric water heaters <a href="https://www.energy.gov.au/households/hot-water-systems">use a lot of electricity</a>, and most of it came from burning coal. </p>
<p>As we generate more electricity from renewables, this picture is changing dramatically. Australia’s energy market operator, AEMO, publishes regularly updated pathways to a clean-energy future. In the most likely outcome, the “<a href="https://aemo.com.au/en/energy-systems/major-publications/integrated-system-plan-isp/2022-integrated-system-plan-isp">step-change scenario</a>”, gas will become the most greenhouse-intensive water-heating option by 2030. </p>
<p>By 2040, once the transition to a renewable electricity system is largely complete, emissions from resistance and heat pump water heaters will be much lower than for their gas counterparts. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/529733/original/file-20230602-25-jsaz8u.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Graph showing projected emissions from 3 kinds of water heaters: electric resistance, heat pump and gas" src="https://images.theconversation.com/files/529733/original/file-20230602-25-jsaz8u.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/529733/original/file-20230602-25-jsaz8u.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=416&fit=crop&dpr=1 600w, https://images.theconversation.com/files/529733/original/file-20230602-25-jsaz8u.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=416&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/529733/original/file-20230602-25-jsaz8u.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=416&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/529733/original/file-20230602-25-jsaz8u.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=523&fit=crop&dpr=1 754w, https://images.theconversation.com/files/529733/original/file-20230602-25-jsaz8u.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=523&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/529733/original/file-20230602-25-jsaz8u.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=523&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The projected emissions intensity of resistance and heat pump water heaters in NSW will soon be much lower than for their gas counterparts. Results for Queensland, Victoria and the ACT are similar to those for NSW.</span>
<span class="attribution"><span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>Water heaters can last 15 years or more. So the stock of heaters in our homes for the next two decades depends on what we install today. Replacing gas heaters with electric heaters should therefore be an immediate priority in our energy transition. </p>
<p><a href="https://www.uts.edu.au/sites/default/files/2023-05/Domestic%20Hot%20Water%20and%20Flexibility.pdf">Our work</a> explored a range of scenarios, each with a different mix of water-heating technologies. One was a business-as-usual baseline where gas water heaters remain prevalent. In alternative scenarios gas is phased out over the next 10–20 years. </p>
<p>We found that replacing gas with electric water heating would not only help us get to net-zero emissions sooner, it would save us money. </p>
<p>Gas is expensive and unlikely to get much cheaper. Abundant renewables offer an excess of cheap electricity that water heaters can help soak up. Embracing this opportunity could save over $6 billion a year on our energy bills by 2040.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/529735/original/file-20230602-23-u38b97.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Graphs comparing stock of different water heater technologies across the NEM from 1990 to 2040" src="https://images.theconversation.com/files/529735/original/file-20230602-23-u38b97.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/529735/original/file-20230602-23-u38b97.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=340&fit=crop&dpr=1 600w, https://images.theconversation.com/files/529735/original/file-20230602-23-u38b97.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=340&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/529735/original/file-20230602-23-u38b97.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=340&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/529735/original/file-20230602-23-u38b97.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=427&fit=crop&dpr=1 754w, https://images.theconversation.com/files/529735/original/file-20230602-23-u38b97.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=427&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/529735/original/file-20230602-23-u38b97.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=427&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">In our modelling of the National Electricity Market, business-as-usual policy (left) locks in costly and high-emissions gas units for decades to come. In our rapid electrification scenario (right), electric water heaters rapidly replace gas units.</span>
<span class="attribution"><span class="license">Author provided</span></span>
</figcaption>
</figure>
<h2>Boosting grid stability</h2>
<p>Solar and wind are now the <a href="https://www.un.org/en/climatechange/renewables-cheapest-form-power">cheapest technologies we’ve ever had for generating electricity</a>. But to maintain a stable electricity system, we need to match demand with the fluctuating supply from renewable sources. Batteries offer a partial solution, but are still relatively costly. </p>
<p>Electric water heaters offer a much cheaper way to store large amounts of energy and provide the demand flexibility the grid needs.</p>
<p><a href="https://www.uts.edu.au/isf/explore-research/projects/domestic-hot-water-and-flexibility">Our research</a> found that, compared to the business-as-usual baseline, a scenario that emphasises demand flexibility using smart electric water heaters could provide an extra 30GWh of daily flexible demand capacity. That’s the equivalent of over 2 million home batteries across the National Electricity Market, which supplies electricity to eastern and southern Australia. </p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1361120769548320770"}"></div></p>
<h2>Back to the future for water heating</h2>
<p>Since the 1950s, “off-peak hot water” has seen Australian electricity providers turning household water heaters off during the day and on at night to better match demand and supply. In return, customers received heavily discounted prices. </p>
<p>In recent decades we’ve moved away from off-peak electric hot water, as incentives dwindled and more homes <a href="https://www.energynetworks.com.au/resources/fact-sheets/reliable-and-clean-gas-for-australian-homes-2/">connected to natural gas</a>.</p>
<p>As we electrify our hot water, which technology should we embrace: resistance or heat pump? The answer is both. </p>
<p><a href="https://www.uts.edu.au/isf/explore-research/projects/domestic-hot-water-and-flexibility">Our research</a> explored the trade-off between highly flexible resistance water heaters versus highly efficient but less flexible heat pumps.</p>
<p>Heat pumps use less electricity and cost less to run. Where electricity prices are high or power flow is limited, using heat pumps makes sense. However, they have a higher upfront cost and are not suited to all homes. Many apartments, for example, lack access to suitable outdoor space. </p>
<p>And because they use less electricity, heat pumps offer less flexible demand. As renewables, particularly solar, increasingly power our grid, the ability of resistance electric heaters to soak up excess “off-peak” renewable energy is a big advantage.</p>
<p>With the right policies and market reforms, we will all benefit from a system that once again rewards customers with cheap off-peak electricity in exchange for network operators being able to switch our water heaters off and on as needed.</p><img src="https://counter.theconversation.com/content/204281/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>David Roche works for the Institute for Sustainable Futures, which received funding for this work from the Australian Renewable Energy Agency (ARENA).</span></em></p>A heater with a 300-litre tank can store as much energy as a home battery at a fraction of the cost. Being able to store surplus solar energy at the right times helps grid stability and cuts emissions.David Roche, Research Director - Strategic Energy Collaborations, University of Technology SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2057512023-06-02T04:01:59Z2023-06-02T04:01:59ZThink of solar panels more like apple trees – we need a fairer approach for what we use and sell<figure><img src="https://images.theconversation.com/files/529012/original/file-20230530-29-q3c6n7.png?ixlib=rb-1.1.0&rect=1%2C161%2C1048%2C713&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Pixabay</span></span></figcaption></figure><p>As we race to decarbonise by <a href="https://www.nytimes.com/interactive/2023/04/14/climate/electric-car-heater-everything.html">electrifying everything</a>, solar panels – now <a href="https://www.iea.org/data-and-statistics/charts/evolution-of-solar-pv-module-cost-by-data-source-1970-2020">cheaper per square metre than marine-grade plywood</a> – will do much of the heavy lifting. But if we don’t rethink how our rooftop panels plug into the grid, the transition will be unfair and costly – for both people who own solar panels (and electric cars and smart appliances) and people who don’t. </p>
<p>Australia has the <a href="https://reneweconomy.com.au/australia-again-tops-global-solar-per-capita-as-world-installs-240gw-of-pv-in-2022/#:%7E:text=The%20new%20report%2C%20which%20sources,of%20the%20Netherlands%20and%20Germany.">world’s highest solar installation rate per person</a>. When solar panels generate more energy than a household is using, the excess electricity can be exported to the grid. Rooftop solar regularly provides more than a <a href="https://reneweconomy.com.au/renewables-reach-record-68-7-per-cent-share-of-grid-power-in-australias-main-grid/">quarter</a> of daytime electricity across the National Electricity Market. At times it exceeds <a href="https://reneweconomy.com.au/rooftop-solar-meets-all-local-network-demand-in-south-australia-for-more-than-five-hours/">90%</a> in South Australia.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1581866199914192896"}"></div></p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/529028/original/file-20230530-17-bktyo0.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Graph showing fall in solar panel prices since 1970 to a point that they're cheaper than marine plywood per square metre" src="https://images.theconversation.com/files/529028/original/file-20230530-17-bktyo0.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/529028/original/file-20230530-17-bktyo0.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=541&fit=crop&dpr=1 600w, https://images.theconversation.com/files/529028/original/file-20230530-17-bktyo0.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=541&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/529028/original/file-20230530-17-bktyo0.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=541&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/529028/original/file-20230530-17-bktyo0.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=680&fit=crop&dpr=1 754w, https://images.theconversation.com/files/529028/original/file-20230530-17-bktyo0.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=680&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/529028/original/file-20230530-17-bktyo0.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=680&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Solar panel prices per square metre since 1970 (assuming 18% efficient modules).</span>
<span class="attribution"><span class="source">Data: IRENA Database. Graph: Niraj Lal</span>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>The amount of solar in our grids is affecting how the Australian Energy Market Operator (AEMO) and distribution businesses (which own the powerlines) keep the lights on. The measures in place are costing households that are generating solar power, but also non-solar owners and network operators. So how can we make the system fairer for all?</p>
<p>We suggest solar panels should be thought of a little more like apple trees. If you have a tree in your backyard you should be able to use as many apples as you produce. But selling apples for profit creates extra responsibilities, along with uncertainties about supply and the fair selling price. </p>
<p>Our new <a href="https://nirajlal.org/files/Lal_2023_TEJ_Give_a_little_to_get_a_little_DER_BoRR.pdf">research paper</a>, published in The Electricity Journal, outlines principles for fairness and proposes a <a href="https://images.theconversation.com/files/529706/original/file-20230602-29-v1dr3.png">bill of rights and responsibilities</a> for connecting to the grid. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/despairing-about-climate-change-these-4-charts-on-the-unstoppable-growth-of-solar-may-change-your-mind-204901">Despairing about climate change? These 4 charts on the unstoppable growth of solar may change your mind</a>
</strong>
</em>
</p>
<hr>
<h2>What’s not fair about the current system?</h2>
<p>At times, the amount of solar energy being exported can be too much for the network to handle. </p>
<p>That’s why inverters (the box on the side of a house with solar panels) have settings that automatically reduce exported electricity when network capacity is under strain. Other mechanisms are also being put in place to allow AEMO to occasionally curtail output from rooftop solar to maintain power system security.</p>
<p>However, such measures not only reduce how much electricity is flowing from a home to the grid, but the <em>entire output</em> of the home’s rooftop system. There aren’t any fundamental reasons for this, just that appropriate inverter and control settings haven’t been enabled. </p>
<p>But this means a household, at times, can’t use any of the electricity it’s generating. In South Australia, the annual cost to customers of this sort of curtailment is already between <a href="https://www.sciencedirect.com/science/article/abs/pii/S0960148121005322">A$1.2 million and A$4.5 million</a>. This isn’t fair.</p>
<p>But it also isn’t fair when solar owners get paid to export electricity when prices are <em>negative</em> – that is, when other generators must <em>pay</em> to keeping exporting to the grid. This is happening more often, totalling <a href="https://aemo.com.au/energy-systems/major-publications/quarterly-energy-dynamics-qed">more than half of all daytime hours</a> in SA and Victoria last quarter. </p>
<p>Nor is it fair for distribution businesses to build more poles and wires to accommodate everyone’s solar exports all the time. Or if the system operator has to buy more reserves to cover for the uncertainties of rooftop solar output.</p>
<p>In these instances, all customers foot the bill whether they own solar panels or not. But non-owners are hit hardest when the costs of such measures are passed on. People without rooftop solar are completely exposed to the <a href="https://www.abc.net.au/news/2023-05-25/australian-energy-regulator-market-offer-electricity-price-rise/102385284">20-25% electricity price rises</a> from July 1. </p>
<p>Some solar owners will hardly notice the increase.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/how-to-maximise-savings-from-your-home-solar-system-and-slash-your-power-bills-197415">How to maximise savings from your home solar system and slash your power bills</a>
</strong>
</em>
</p>
<hr>
<h2>It’s time to rethink the social contract for grid electricity</h2>
<p>Australia’s electrification will replace fossil fuels to run households, businesses, vehicles and industry. It’s expected <a href="https://aemo.com.au/en/energy-systems/major-publications/integrated-system-plan-isp">rooftop solar will increase five-fold</a>. How should households with these growing distributed energy resources interact with the grid in future?</p>
<p>We reckon the social contract for grid electricity needs to evolve from the pay-plug-play expectations dating from the 19th century to a two-way engagement to support fairness for all. </p>
<p>To return to the apple tree analogy, if you have a tree in your backyard you should be able to eat as many apples as you’d like, and make crumble, cider, whatever. But selling apples for profit comes with a responsibility not to carry codling moth. And selling crumble or cider is subject to food safety and licensing requirements. </p>
<figure class="align-center ">
<img alt="Person holding a crate of apples picked off a tree behind them" src="https://images.theconversation.com/files/529029/original/file-20230530-19-vm7aep.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/529029/original/file-20230530-19-vm7aep.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/529029/original/file-20230530-19-vm7aep.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/529029/original/file-20230530-19-vm7aep.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/529029/original/file-20230530-19-vm7aep.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/529029/original/file-20230530-19-vm7aep.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/529029/original/file-20230530-19-vm7aep.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">If there’s an abundance of apples, you can’t expect to sell them for a high price.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<p>And the prices? That depends on the availability of trucks and local market value. Maybe you or our government could pay more for trucks for everyone to be able to sell apples all the time, but it probably wouldn’t be efficient or fair. </p>
<p>The main distinction we draw is between growing for yourself and selling for profit. The analogy obviously isn’t perfect. Apples aren’t an essential service, apple trucks aren’t a regulated monopoly, and the supply and demand of apples doesn’t need to be balanced every second. </p>
<p>However, the principles remain – especially for a future where apple trees (rooftop solar) and apple warehouses (home batteries and electric vehicles) are everywhere.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/batteries-are-the-environmental-achilles-heel-of-electric-vehicles-unless-we-repair-reuse-and-recycle-them-205404">Batteries are the environmental Achilles heel of electric vehicles – unless we repair, reuse and recycle them</a>
</strong>
</em>
</p>
<hr>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/529209/original/file-20230530-15-8sf2sq.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Table showing 8 principles for a bill of distributed energy resource bill of rights and responsibilities." src="https://images.theconversation.com/files/529209/original/file-20230530-15-8sf2sq.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/529209/original/file-20230530-15-8sf2sq.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=523&fit=crop&dpr=1 600w, https://images.theconversation.com/files/529209/original/file-20230530-15-8sf2sq.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=523&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/529209/original/file-20230530-15-8sf2sq.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=523&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/529209/original/file-20230530-15-8sf2sq.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=657&fit=crop&dpr=1 754w, https://images.theconversation.com/files/529209/original/file-20230530-15-8sf2sq.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=657&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/529209/original/file-20230530-15-8sf2sq.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=657&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The principles guiding a bill of rights and responsibilities for distributed energy resources. CC-BY-NC-SA.</span>
<span class="attribution"><span class="license">Author provided</span></span>
</figcaption>
</figure>
<h2>A fairer balance of rights and responsibilities</h2>
<p>In our research <a href="https://nirajlal.org/research.html">paper</a> we distinguish between rights for passive use (using your own rooftop solar electricity) and responsibilities for active use (selling electricity). </p>
<p>No-one should be able to stop you using your own self-generated electricity (for the vast majority of the time). But making money from the grid will likely come with responsibilities to allow trusted parties such as network operators to manage your exports at times (a system known as flexible export limits).</p>
<p>If you’re charging and discharging batteries for profit, you will likely have a responsibility to provide some <a href="https://theconversation.com/how-closely-monitoring-households-energy-data-can-unleash-their-solar-outputs-and-possibly-make-them-more-money-196134">visibility of your expected use</a> to help the operator <a href="https://aemo.com.au/initiatives/major-programs/nem-distributed-energy-resources-der-program/der-demonstrations/project-edge">manage the grid</a>. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/how-closely-monitoring-households-energy-data-can-unleash-their-solar-outputs-and-possibly-make-them-more-money-196134">How closely monitoring households' energy data can unleash their solar outputs and (possibly) make them more money</a>
</strong>
</em>
</p>
<hr>
<p>In a country with lots of solar energy, prices for selling energy mightn’t be guaranteed all the time either.</p>
<p>We must think about this new social contract. If we don’t, electrifying everything will be harder, more expensive, less fair and more reliant on large-scale projects requiring new transmission lines, which are complex and costly to build. </p>
<p>The story of distributed electricity is incredible – the power is literally in our hands when we flick a switch, grab the wheel, buy a product. We have an opportunity now to make it work better and be fairer for all of us. </p>
<hr>
<p><em>You can see a summary of the DER Bill of Rights and Responsibilities <a href="https://images.theconversation.com/files/529706/original/file-20230602-29-v1dr3.png">here</a>.</em></p><img src="https://counter.theconversation.com/content/205751/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>This article was co-authored by Lee Brown Specialist – Market Design and Development at the Australian Energy Market Operator (AEMO), where he is leading Australia’s reforms of DER access and pricing. Niraj Lal and Lee Brown both work at AEMO, though the opinions in this article and associated research paper are solely those of the authors and not of AEMO.
Niraj Lal is additionally an Academic Expert for the International Energy Agency PV Task 14. He has been awarded funding from a range of organisations including the UK Government, the Australian Renewable Energy Agency, and the Australian Broadcasting Corporation.</span></em></p>The need to limit output to the grid costs solar panel owners up to $4.5 million a year in South Australia alone. A bill of rights and responsibilities can make connecting to the grid fairer for all.Niraj Lal, Visiting Fellow at the ANU Centre for Sustainable Energy Systems, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2018692023-03-16T05:20:41Z2023-03-16T05:20:41ZWhy are electricity prices going up again, and will it ever end?<figure><img src="https://images.theconversation.com/files/515672/original/file-20230316-20-jqtc08.jpg?ixlib=rb-1.1.0&rect=28%2C0%2C4716%2C3165&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock </span></span></figcaption></figure><p>Households and businesses are set for more hip-pocket pain after regulators on Wednesday released draft details of electricity price rises in four Australian states.</p>
<p>The Australian Energy Regulator <a href="https://www.aer.gov.au/news-release/default-market-offer-2023%E2%80%9324-draft-determination">revealed</a> residential customers on standard plans should brace for price increases of up to 24% in the next financial year. The price rises apply to households in Queensland, New South Wales and South Australia.</p>
<p>The Victorian regulator <a href="https://www.esc.vic.gov.au/media-centre/victorian-default-offer-2023-24-draft-decision">also flagged</a> an electricity price hike of up to 30% in that state.</p>
<p>It’s another blow in an already difficult financial situation for many, as interest rates continue to rise and inflation soars. Consumers are justified in asking: why is this happening? And is there an end in sight?</p>
<figure class="align-center ">
<img alt="Lit-up city skyline at night" src="https://images.theconversation.com/files/515693/original/file-20230316-28-allg6u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/515693/original/file-20230316-28-allg6u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/515693/original/file-20230316-28-allg6u.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/515693/original/file-20230316-28-allg6u.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/515693/original/file-20230316-28-allg6u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/515693/original/file-20230316-28-allg6u.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/515693/original/file-20230316-28-allg6u.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Regulators on Wednesday signalled more electricity price rises.</span>
<span class="attribution"><span class="source">Jono Searle/AAP</span></span>
</figcaption>
</figure>
<h2>The basics, explained</h2>
<p>The regulator released a draft of what’s known as the “default market offer”. It’s basically the maximum amount energy retailers can charge customers on default energy plans. </p>
<p>So what’s a default energy plan? It’s the standard plan you’re on if you didn’t negotiate a special deal with your energy retailer, or if a deal you were on has expired.</p>
<p>According to the ABC, <a href="https://www.abc.net.au/news/2023-03-15/australian-energy-regulator-default-market-offer/102094290">around one million</a> electricity customers in the four states mentioned above are on default market offers.</p>
<p>Many consumers are on default plans because they don’t have the time or inclination to engage with their electricity retailer to negotiate a better deal. Others, quite understandably, find the whole process too confusing to navigate.</p>
<p>That’s why default market offers were introduced. Both the federal and Victorian policies were developed <a href="https://www.esc.vic.gov.au/electricity-and-gas/inquiries-studies-and-reviews/electricity-and-gas-retail-markets-review-implementation-2018">after</a> <a href="https://www.accc.gov.au/media-release/accc-releases-blueprint-to-reduce-electricity-prices">reviews</a> found competition in retail electricity markets was not leading to lower prices for households or small businesses.</p>
<p>The Victorian default offer began <a href="https://www.esc.vic.gov.au/electricity-and-gas/inquiries-studies-and-reviews/electricity-and-gas-retail-markets-review-implementation-2018">in 2019</a>. The federal measure <a href="https://www.aer.gov.au/retail-markets/guidelines-reviews/default-market-offer-prices-2023%E2%80%9324">was applied</a> <a href="https://www.aer.gov.au/retail-markets/guidelines-reviews/default-market-offer-prices-2020%E2%80%9321">in 2020</a>. </p>
<p>The regulators release a draft determination ahead of a final decision, expected soon.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/first-look-at-the-new-settlement-rule-of-australias-electricity-market-has-it-worked-200647">First look at the new settlement rule of Australia's electricity market, has it worked?</a>
</strong>
</em>
</p>
<hr>
<h2>So why the price hike?</h2>
<p>Your electricity bill comprises several different charges. The biggest ones are:</p>
<p><strong>- wholesale energy costs:</strong> the price generators such as coal and gas plants charge your retailer for the electricity delivered to you</p>
<p><strong>- network costs:</strong> the price charged by companies that own the “poles and wires” – transmission lines, transformers, electricity poles and the like – needed to get the electricity to your home</p>
<p><strong>- retail costs:</strong> the total amount needed by an electricity retailer to operate – such as issuing bills, providing customer service, marketing themselves – as well as to make a reasonable profit. </p>
<p>Regulators calculate the default market offer by considering each of these price components.</p>
<figure class="align-center ">
<img alt="electricity pole and wires" src="https://images.theconversation.com/files/515694/original/file-20230316-22-rp5i7k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/515694/original/file-20230316-22-rp5i7k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=404&fit=crop&dpr=1 600w, https://images.theconversation.com/files/515694/original/file-20230316-22-rp5i7k.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=404&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/515694/original/file-20230316-22-rp5i7k.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=404&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/515694/original/file-20230316-22-rp5i7k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=508&fit=crop&dpr=1 754w, https://images.theconversation.com/files/515694/original/file-20230316-22-rp5i7k.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=508&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/515694/original/file-20230316-22-rp5i7k.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=508&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Network costs – or the ‘poles and wires’ charges – form part of your electricity bill.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<p>The increased default market offers are mostly due to increases in wholesale prices. </p>
<p>Wholesale prices increased in recent months almost entirely as a result of sanctions imposed on Russia following its invasion of Ukraine. It led to a global shortage of natural gas. This was exacerbated when Russia <a href="https://www.bloomberg.com/news/articles/2022-05-31/russia-to-cut-gas-exports-to-shell-orsted-over-rubles-dispute">withdrew gas</a> supplies from the European market. </p>
<p>Even though the energy shocks were happening half a world away from Australia, it affected domestic gas prices here. Why? Because most of Australia’s east coast gas is exported, which means its price is largely determined by the global price. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/energy-bills-are-spiking-after-the-russian-invasion-we-should-have-doubled-down-on-renewables-years-ago-179336">Energy bills are spiking after the Russian invasion. We should have doubled-down on renewables years ago</a>
</strong>
</em>
</p>
<hr>
<p>This could have been avoided if the federal government has a mechanism to keep some of that gas for the domestic market – in other words, if it had a so-called “gas reservation policy”. But the current and previous governments have <a href="https://www.smh.com.au/business/companies/it-s-ridiculous-architect-of-wa-policy-calls-for-national-gas-reservation-20220616-p5au8q.html">refused</a> to implement this.</p>
<p>The federal regulator said the planned retirement of AGL’s ageing Liddell coal-fired power station in the NSW Hunter Valley contributed to its decision. Liddell is one of the biggest coal-fired generators in the national electricity market, and the closure is likely to lead to a short-term tightening of supplies. </p>
<p>Another factor affecting the regulators’ decision relates to a strategy electricity retailers use to protect themselves against volatile wholesale prices in future. The strategy, known as hedge contracts, <a href="https://www.aemc.gov.au/energy-system/electricity/electricity-market/spot-and-contract-markets">fixes the wholesale price</a> retailers pay for electricity over a long period – up to several years.</p>
<p>The price set in hedge contracts struck over the past year or so was influenced by Australia’s <a href="https://onlinelibrary.wiley.com/doi/full/10.1111/1467-8462.12492">domestic gas crisis</a> in 2022, which caused massive rises in wholesale electricity prices. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/492032/original/file-20221027-18054-ubewpk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="gas burner" src="https://images.theconversation.com/files/492032/original/file-20221027-18054-ubewpk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/492032/original/file-20221027-18054-ubewpk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/492032/original/file-20221027-18054-ubewpk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/492032/original/file-20221027-18054-ubewpk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/492032/original/file-20221027-18054-ubewpk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/492032/original/file-20221027-18054-ubewpk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/492032/original/file-20221027-18054-ubewpk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">AUstralia’s gas prices are linked to global markets.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<h2>What to expect down the track</h2>
<p>Australian Energy Regulator chair Clare Savage on Wednesday said the price increases <a href="https://www.abc.net.au/news/2023-03-15/australian-energy-regulator-default-market-offer/102094290">could have been much higher</a>, if not for intervention by the Albanese government late last year to cap prices in Australia’s gas and coal markets.</p>
<p>Climate Change and Energy Minister Chris Bowen says those price caps have saved households between A$268 and $530.</p>
<p>The caps are likely to cause further falls in the default market offer in coming years. But the policy appears to be only an interim measure until the global supply shortage eases.</p>
<p>In the longer term, renewable energy offers a ray of hope.</p>
<p>The federal government has set a target of 82% renewable electricity by 2030. But of course, a few significant <a href="https://www.climatecouncil.org.au/understanding-whats-next-for-australias-main-electricity-market/">complementary measures</a> – such as more investment in transmission networks and energy storage – are needed.</p>
<p>This investment would support the transition to a zero-emissions electricity sector. Importantly, it would also insulate long-suffering consumers from volatile fossil fuel prices.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/will-your-energy-bills-ever-come-down-only-if-labor-gets-serious-with-the-gas-majors-193298">Will your energy bills ever come down? Only if Labor gets serious with the gas majors</a>
</strong>
</em>
</p>
<hr>
<img src="https://counter.theconversation.com/content/201869/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ariel Liebman has provided occasional advice to, and has received funding from, companies across the energy sector. He currently receives funding from the Australian Research Council.</span></em></p>Households and businesses are set for more hip-pocket pain after regulators flagged hefty electricity price rises in four Australian states.Ariel Liebman, Ariel Liebman Director, Monash Energy Institute and Professor of Sustainable Energy Systems, Faculty of Information Technology, Monash UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2006472023-03-07T19:06:02Z2023-03-07T19:06:02ZFirst look at the new settlement rule of Australia’s electricity market, has it worked?<figure><img src="https://images.theconversation.com/files/513563/original/file-20230306-26-pelyme.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/clean-shiny-lightbulb-australia-glowing-wireseries-563609494">Per Bengtsson from shutterstock.com</a></span></figcaption></figure><p>You might not realise this when you flick your switch at home, but Australian electricity generators are forever locked in a bidding war. They compete for the right to supply electricity on the <a href="https://www.aemc.gov.au/energy-system/electricity/electricity-market/spot-and-contract-markets">spot market</a>. The cheapest bids win and electricity from those generators is supplied, or “dispatched”, to the grid in five-minute intervals. </p>
<p>This means that every five minutes, the electricity grid is rebalanced to ensure supply meets demand. Too little supply causes blackouts; too much causes tripping (and more blackouts). </p>
<p>But until recently, the price paid for wholesale electricity (the settlement price) on the Australian National Electricity Market (NEM) was averaged over six five-minute intervals (30 minutes). (Australia is unusual in this regard. Many grids elsewhere such as in Europe operate forward or day-ahead markets, where supply is planned in advance.) </p>
<p>That worked fine in the early days, but when supply started to fluctuate more wildly with the advent of intermittent renewable energy, so did the bidding war. Some generators starting gaming the system, pushing prices sky-high. Retailers complained. </p>
<p>So when the NEM finally introduced <a href="https://aemo.com.au/initiatives/major-programs/past-major-programs/five-minute-settlement/5ms-program-management/5ms-commencement">five-minute settlement</a> in October 2021, it was a big deal. There was a great deal of <a href="https://www.fluxfederation.com/blog/5-hot-minutes-keeping-pace-with-australias-5-minute-settlement-rules">excitement</a>. Most <a href="https://www.solarquotes.com.au/blog/nem-5-minute-settlement/">commentators</a> expected wholesale electricity prices to settle down, coal to lose market share, and batteries to boom. That’s mainly because the new system would be more efficient, rewarding cheap, nimble and flexible generators including batteries. </p>
<p>But what actually happened? <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4306687">Our analysis</a> reveals the average spot price went up, not down, in Tasmania, Queensland, and New South Wales. Black coal-fired generators made more money on the spot market, not less. Flexible generators, especially batteries, did well too. (In the other NEM states, South Australia and Victoria, there was no significant change). </p>
<p>We argue further changes are needed to achieve the desired effects. These include increasing competition in the market (reducing the power of the three biggest electricity generators), building the infrastructure needed to support a green grid, and investing in more flexible and fuel-efficient technologies. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/australias-energy-market-operator-is-worried-about-the-grids-reliability-but-should-it-be-200355">Australia's energy market operator is worried about the grid's reliability. But should it be?</a>
</strong>
</em>
</p>
<hr>
<h2>Greening the grid</h2>
<figure class="align-center ">
<img alt="Man wearing a hi-vis vest and hard hat looking at solar panels with wind turbines in the background." src="https://images.theconversation.com/files/513567/original/file-20230306-28-kjs31d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/513567/original/file-20230306-28-kjs31d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=338&fit=crop&dpr=1 600w, https://images.theconversation.com/files/513567/original/file-20230306-28-kjs31d.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=338&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/513567/original/file-20230306-28-kjs31d.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=338&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/513567/original/file-20230306-28-kjs31d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=425&fit=crop&dpr=1 754w, https://images.theconversation.com/files/513567/original/file-20230306-28-kjs31d.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=425&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/513567/original/file-20230306-28-kjs31d.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=425&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The National Electricity Market is transitioning fast to renewable energy generation to meet Australia’s 2030 emissions reduction target.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/man-working-solar-panels-wind-turbines-1924726478">DisobeyArt from www.shutterstock.com</a></span>
</figcaption>
</figure>
<p>The NEM opened in 1998. The market adopted a <a href="https://www.energycouncil.com.au/analysis/five-minute-settlement-starts-tomorrow/#:%7E:text=A%20momentous%20change%20in%20the,own%20dispatch%20price%20(5ms)">30-minute settlement rule</a> at the time, because five-minute settlement would have pushed the limits of metering and data-processing capabilities.</p>
<p>But as the share of renewable energy grew, it became increasingly apparent that more flexible technology would be needed to cope with intermittent solar and wind power.</p>
<p>Problems included frequent price spikes, blackouts, power tripping, and <a href="https://reneweconomy.com.au/regulators-report-points-to-outrageous-gaming-of-south-australia-energy-market-77433/">“gaming” behaviours by major generators</a>. </p>
<p>Energy retailers became frustrated by this gaming behaviour in particular, and complained to the authorities, prompting the rule change. Previously, coal and gas generators could send dispatch prices through the roof in one interval, so that when prices were averaged over the 30 minutes, it made the final trading price high. One way of doing this was to create artificial scarcity of supply, by withdrawing generation to raise spot prices. </p>
<p>When a price spike occurred, generators would then <a href="https://reneweconomy.com.au/5ms-explainer-the-early-bidder-will-catch-the-worm/">pile in</a> by offering a lower price for the remainder of the 30-minute settlement period. </p>
<p>Five-minute settlement aimed to resolve these issues and better support the integration of wind and solar power into the electricity grid, ultimately making electricity more affordable for customers.</p>
<p>The new rule would also encourage investment in faster response technologies such as batteries. </p>
<p>Our <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4306687">study</a> adds to the understanding of early effects of this regulatory change in the NEM. This will support the transition to clean energy generation, and inform policy for future electricity markets that offer stability, security and lower prices. We also propose courses of action to facilitate more effective adaptation to the rule change.</p>
<h2>Did the new rule work?</h2>
<p>The market had <a href="https://aemo.com.au/-/media/files/electricity/nem/5ms/5ms-journey.pdf?la=en&hash=179A3EA8EC47A2D4BB6652FE06421378">four years to prepare</a> for the rule change, allowing generators to <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4306687">adjust their operations</a>.</p>
<p>When five-minute settlement came in on October 1 2021, there was no substantial immediate effect. </p>
<p>However, within the first eight months of the change, the market started to adjust. We found that five-minute settlement led to an <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4306687">average spot price increase</a> (not decrease) in Tasmania, Queensland and New South Wales. </p>
<p>That’s because generators no longer had a financial incentive to rebid at a very low price after a price spike, as they had done in a 30-minute trading interval. That was a strategy that caused <a href="https://reneweconomy.com.au/how-5-minute-settlements-changed-the-bidding-game-for-coal-gas-and-renewables/">significant fluctuation in the spot price</a>. </p>
<p>Promisingly, the implementation of five-minute settlement had no measurable impact on the intensity of electricity price fluctuations. That suggests the new rule may have been effective in maintaining price stability. </p>
<p>So, in these early stages of the rule change, wholesale electricity customers are actually paying more, but the price has been more stable. </p>
<p>The impact on retail prices remains uncertain. The <a href="https://www.aemc.gov.au/energy-system/electricity/electricity-market/spot-and-contract-markets">retailers’ costs</a> of buying electricity and managing price risks are one component of what costumers pay in their energy bills. In 2020–21, it accounted for about a third of their bill. So if these effects persist, there is a possibility these higher prices will be passed on to consumers as well.</p>
<p>We also found that variable and flexible generators, especially batteries, <a href="https://reneweconomy.com.au/big-batteries-score-early-gains-in-switch-to-five-minute-settlement/">took advantage of their flexibility</a> to capture more revenue from the spot market. Gas generators’ revenue barely changed, but that could be because less flexible gas generators are lumped in together with highly flexible gas generators. </p>
<p>Surprisingly, the revenue earned by black coal-fired generators also increased. We suspect generators changed their operations and <a href="https://reneweconomy.com.au/how-5-minute-settlements-changed-the-bidding-game-for-coal-gas-and-renewables/">bidding strategies</a> to align with the five-minute settlement rule. However, revenue for coal-fired generators is still likely to fall over the medium to long term. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/513544/original/file-20230306-5027-5fsvwn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="The Liddell Power Station, left, and Bayswater Power Station, coal-powered thermal power station are pictured near Muswellbrook in the Hunter Valley, Australia on Nov. 2, 2021." src="https://images.theconversation.com/files/513544/original/file-20230306-5027-5fsvwn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/513544/original/file-20230306-5027-5fsvwn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=366&fit=crop&dpr=1 600w, https://images.theconversation.com/files/513544/original/file-20230306-5027-5fsvwn.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=366&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/513544/original/file-20230306-5027-5fsvwn.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=366&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/513544/original/file-20230306-5027-5fsvwn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=460&fit=crop&dpr=1 754w, https://images.theconversation.com/files/513544/original/file-20230306-5027-5fsvwn.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=460&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/513544/original/file-20230306-5027-5fsvwn.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=460&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">AGL Macquarie, which includes the Liddell and Bayswater power stations shown here, is one of the largest electricity producers in Australia.</span>
<span class="attribution"><a class="source" href="https://photos.aap.com.au/">Mark Baker/AP</a></span>
</figcaption>
</figure>
<h2>Three ways to improve five-minute settlement</h2>
<p>It will take time to see the full effect of the rule change on the wholesale and retail electricity markets. However, we think the following changes are needed to fully realise the benefits of five-minute settlement: </p>
<ol>
<li><p><strong>Market concentration</strong>. The NEM is a concentrated market. The three largest generators, <a href="https://www.aer.gov.au/system/files/State%20of%20the%20energy%20market%202021%20-%20Full%20report_1.pdf">AGL Energy, Origin Energy and Energy Australia</a>, hold a substantial market share. Together, they supply about 80% of the generated energy. Policies that promote competition are key to realising the benefits of five-minute settlement. </p></li>
<li><p><strong>Supporting infrastructure</strong>. Five-minute settlement is expected to increase the operational cost of generating coal-fired power. That’s because ageing power plants would need to be upgraded to be able to compete during periods of fluctuating demand. Renewable generators, on the other hand, have extremely low operating costs, largely due to having no fuel costs. Coal-fired generators are likely to lose revenue and leave the market much earlier than expected. Firming and flexible demand technologies such as energy storage systems (pumped hydro, batteries or solar thermal) can effectively respond to the new market conditions and fill the gap. </p></li>
<li><p><strong>Fuel-efficient and flexible technologies</strong>. Technologies such as batteries, pumped hydro and <a href="https://turbinetechnics.com/understanding-aeroderivative-gas-turbines">aero-derivative gas turbines</a> operate more effectively in a five-minute settlement design. The recent rise in gas prices also necessitates investment in flexible and fuel-efficient technologies, such as <a href="https://www.energy.gov/eere/amo/articles/reciprocating-engines-doe-chp-technology-fact-sheet-series-fact-sheet-2016#:%7E:text=Fuel%20Reciprocating%20engines%20can%20be,widely%20used%20in%20CHP%20applications.">reciprocating gas engines</a>. </p></li>
</ol>
<p>Without policies to address these three areas, we believe five-minute settlement is unlikely to offer substantial benefits to the market.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/5-policy-decisions-from-recent-history-that-led-to-todays-energy-crisis-185207">5 policy decisions from recent history that led to today's energy crisis</a>
</strong>
</em>
</p>
<hr>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/513858/original/file-20230307-20-dqr1v4.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/513858/original/file-20230307-20-dqr1v4.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=1012&fit=crop&dpr=1 600w, https://images.theconversation.com/files/513858/original/file-20230307-20-dqr1v4.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=1012&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/513858/original/file-20230307-20-dqr1v4.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=1012&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/513858/original/file-20230307-20-dqr1v4.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1272&fit=crop&dpr=1 754w, https://images.theconversation.com/files/513858/original/file-20230307-20-dqr1v4.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1272&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/513858/original/file-20230307-20-dqr1v4.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1272&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="source" href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4306687">SSRN/Australian Energy Regulator</a></span>
</figcaption>
</figure><img src="https://counter.theconversation.com/content/200647/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>How has the national electricity market responded to one of the biggest reforms in years, the introduction of five-minute settlement? Analysis reveals more than a few surprises.Christina Nikitopoulos, Associate professor, Finance Discipline Group, University of Technology SydneyMuthe Mwampashi, PhD Candidate, University of Technology SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1962772022-12-09T05:50:05Z2022-12-09T05:50:05ZWill price caps on gas bring power prices down? An expert isn’t so sure<figure><img src="https://images.theconversation.com/files/499936/original/file-20221209-25553-em7gyg.jpg?ixlib=rb-1.1.0&rect=0%2C110%2C3866%2C2011&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>In a bid to arrest escalating power prices, Australia’s federal, state and territory governments have agreed to impose caps on the wholesale price of coal and gas.</p>
<p>Announcing the decision after National Cabinet met on Friday, Prime Minister Anthony Albanese said parliament would be recalled next week to pass the necessary legislation. He indicated there was enough crossbench support for this to be a formality. </p>
<p>There will also be $1.5 billion to subsidise electricity bills for households and small businesses. This will be administered by state and territory governments starting in April 2023, and for households it will be subject to means tests. </p>
<p>For the next year, coal used in Australia cannot be sold in wholesale markets for more than $125 a tonne. Gas used in Australia cannot be sold in wholesale markets for more than $12 a gigajoule.</p>
<p>At the time of writing, the short-term (spot) market price for coal at the Newcastle export terminal was <a href="https://www.barchart.com/futures/quotes/LQ*0/futures-prices">$580 a tonne</a>. Gas could be bought at the Wallumbilla hub near Brisbane <a href="https://www.aemo.com.au/energy-systems/gas/short-term-trading-market-sttm/data-sttm/data-dashboard-sttm">for $22 a gigajoule</a>. </p>
<p>With such a big gap between spot coal and gas prices and the announced caps, can we expect much lower gas and electricity prices? </p>
<p>In short, maybe or maybe not. </p>
<p>The aphorism “the devil is in the detail” is made for questions like this. This is because of the complex ways domestic coal and gas markets are linked to export markets, how supplies are contracted, and the lack of publicly available information on supply and demand in these markets. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/5-policy-decisions-from-recent-history-that-led-to-todays-energy-crisis-185207">5 policy decisions from recent history that led to today's energy crisis</a>
</strong>
</em>
</p>
<hr>
<h2>Effect on coal price</h2>
<p>The majority of Australia’s coal-fired electricity generators get their coal from nearby mines. Much of this coal cannot be exported, either because of its low quality (such as the brown coal of Victoria’s Latrobe Valley) or because the transport infrastructure doesn’t exist.</p>
<p>This “mine mouth” coal is therefore unaffected by export prices. Its price is based on extraction and delivery costs, plus a margin (of course). In all cases this is well below the $125 per tonne cap.</p>
<p>There are exceptions. Two of Queensland’s eight coal-fired generators – the government-owned Stanwell and the privately owned Gladstone – are supplied by mines able to divert some coal to export markets. </p>
<p>In NSW, coal from most of the mines that supply the state’s six coal-fired stations can, to varying degrees, be diverted. But much of this supply is already contracted for years ahead, so the export price is unlikely to be an accurate estimate of the price power stations will pay. </p>
<p>As best we know, <a href="https://www.smh.com.au/business/companies/coal-crunch-hits-origin-s-eraring-power-plant-as-energy-crisis-deepens-20220601-p5aq81.html">only the Eraring station</a>, near Newcastle in NSW’s Hunter region, is currently paying a price higher than the cap. </p>
<p>In the National Energy Market covering eastern Australia the price of the most expensive generator sets the price all generators receive. The coal price cap is therefore likely to make a difference to wholesale electricity prices when the Eraring power station is setting the market price. </p>
<p>This happens about 30% of the time, according to the <a href="https://www.vepc.org.au/nem-dashboard">publicly available data</a>. So capping the coal price Eraring will pay much below what it is now paying could have a big effect on electricity prices. </p>
<p>But there’s a caveat. How will Eraring’s coal supplier respond? </p>
<p>Will it continue to supply coal at the lower capped price? Or will it decide to divert that coal to more lucrative export markets? </p>
<p>If the former, we can reasonably say the cap will reduce electricity prices. </p>
<p>If the latter, we could potentially be facing a supply crisis, with much higher electricity prices. If Eraring, the largest generator in eastern Australia, sits idle for want of coal to burn, more expensive gas generators (if available) will have to take its place.</p>
<h2>Effects on gas price</h2>
<p>What about gas? It’s a similar story to coal, although diverting gas to the export market is easier than for coal (because gas is much easier to move than coal and the pipeline network is much more extensive than the coal freight network). </p>
<p>As a result, domestic spot gas prices are more closely linked to export prices. </p>
<p>Like the coal price cap, the gas price cap is much lower than spot gas price. So the question is whether gas suppliers will sell uncontracted gas at the capped price, or politely decline. </p>
<p>The government hopes the Heads of Agreement with gas suppliers will ensure supply. It remains to be seen whether such a deal will ensure supply at a much lower price than we see in the gas markets today, at least for spot market purchases. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/hey-minister-leave-that-gas-trigger-alone-it-may-fire-up-a-fight-with-foreign-investors-185710">Hey minister, leave that gas trigger alone – it may fire up a fight with foreign investors</a>
</strong>
</em>
</p>
<hr>
<h2>Imperfect information</h2>
<p>None of this is to suggest the decision to impose price caps is necessarily flawed. </p>
<p>I do not have the necessary information about the existing situation, or accurate foresight of what lies ahead, to pass a categorical judgement. Presumably neither do any of our governments. None of us can confidently predict success or failure. </p>
<p>At the media briefing to announce the policy, Albanese was asked to quantify the effect on prices. He wisely refused to name a number, but insisted the policy would place “downward pressure” on prices. Presumably the government intends that the rebates (to be funded by federal taxpayers and the jurisdictions) will kick in if the wholesale caps don’t work as hoped. </p>
<p>Are there obviously better solutions? </p>
<p>Orthodox economists would suggest these challenges should be handled outside the market (for example through coal and gas export taxes, which would provide income to bail out exposed customers). </p>
<p>Sounds easy, but here too many devils lurk in the details.</p><img src="https://counter.theconversation.com/content/196277/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Bruce Mountain does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Australia’s governments have agreed to impose caps on the wholesale domestic price of coal and gas. How much it will help is debatable.Bruce Mountain, Director, Victoria Energy Policy Centre, Victoria UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1950962022-11-28T05:39:54Z2022-11-28T05:39:54ZVictoria faces a grave climate and energy crisis. The new government’s policies must be far bolder<p>The Andrews Labor government has been returned in Victoria. It must now reckon with two particularly crucial challenges: runaway climate change and wartime-scale energy costs. </p>
<p>Victorians are still reeling from rare <a href="https://theconversation.com/floods-in-victoria-are-uncommon-heres-why-theyre-happening-now-and-how-they-compare-to-the-past-192391">major flooding</a> in which the state’s largest dam, Dartmouth, spilled over. Meanwhile, <a href="https://www.esc.vic.gov.au/electricity-and-gas/market-performance-and-reporting/victorian-energy-market-report">electricity prices</a> in Victoria are rising dramatically.</p>
<p>The Andrews government has signalled a major shakeup of Victoria’s energy sector. Its pre-election <a href="https://www.climatecouncil.org.au/resources/victoria-makes-gains-in-race-to-net-zero-with-new-targets/#:%7E:text=Victoria%20has%20released%20new%20emissions,target%20of%2095%25%20by%202035.">commitments</a> – a 95% renewable electricity target by 2035 and net-zero emissions by 2045 – are definite moves in the right direction. </p>
<p>And <a href="https://www.theguardian.com/australia-news/2022/oct/22/daniel-andrews-plans-to-revive-the-state-electricity-commission-what-will-it-mean-for-victorias-power">plans to</a> reinstate the State Electricity Commission, including a constitutional amendment to cement this change permanently, speaks to the government’s intention to regain control of the electricity market and skyrocketing energy prices. </p>
<p>These are significant pledges and daunting tasks to accomplish. But the Victorian government must go further to secure the energy sector and take stronger climate action. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/497568/original/file-20221128-18-2aq18.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Power station at the end of a road" src="https://images.theconversation.com/files/497568/original/file-20221128-18-2aq18.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/497568/original/file-20221128-18-2aq18.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/497568/original/file-20221128-18-2aq18.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/497568/original/file-20221128-18-2aq18.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/497568/original/file-20221128-18-2aq18.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/497568/original/file-20221128-18-2aq18.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/497568/original/file-20221128-18-2aq18.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Vcitoria’s Loy Yang coal-fired power station will shut a decade earlier than expected.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<h2>Reducing energy costs</h2>
<p>Today’s high energy costs are driven primarily by fossil fuel <a href="https://theconversation.com/why-did-gas-prices-go-from-10-a-gigajoule-to-800-a-gigajoule-an-expert-on-the-energy-crisis-engulfing-australia-184304">supply constraints</a>. The reduction in gas supply due to sanctions on Russia has exposed the delicate balance of supply and demand, and the fragility of the global fossil-based energy system. </p>
<p>For more than a decade, specialists have known the long-term solution to reduce electricity prices and cost volatility: a large-scale shift to renewable sources of energy. </p>
<p>This would <a href="https://theconversation.com/3-key-measures-in-the-suite-of-new-reforms-to-deal-with-australias-energy-crisis-184554">shield us from</a> short-term supply and demand shocks because the cost of renewables-produced wholesale energy is fixed at construction, with no variable costs such as fuel. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/why-did-gas-prices-go-from-10-a-gigajoule-to-800-a-gigajoule-an-expert-on-the-energy-crisis-engulfing-australia-184304">Why did gas prices go from $10 a gigajoule to $800 a gigajoule? An expert on the energy crisis engulfing Australia</a>
</strong>
</em>
</p>
<hr>
<p>Shifting to renewables would also make electricity cheaper than coal and gas in countries with major wind and sun advantages, <a href="https://gwec.net/wp-content/uploads/2022/04/Annual-Wind-Report-2022_screen_final_April.pdf">such as Australia</a> and Indonesia. And it would decouple electricity production from strongly geographically concentrated sources of fossil fuels such as in the middle east.</p>
<p>But realistically, in the next two years or so the Victorian and Australian governments can only manage energy prices by curbing the worst excesses of an unfettered free market operation in natural gas and retail electricity. </p>
<p>We are still working with precisely the same market frameworks as when deregulation started in 1998. Victoria, and the other states, need to accept that this framework has failed to produce benefits to consumers, particularly for households.</p>
<p>For example, in the decade to June 2013, electricity prices for Australian households <a href="https://www.aph.gov.au/about_parliament/parliamentary_departments/parliamentary_library/pubs/briefingbook44p/energyprices">increased by an average 72%</a> in real terms.</p>
<p>We must go back to the drawing board to determine what the energy market should look like. In the meantime, Australian states and territories must consider reimposing price caps on energy retailers.</p>
<p>An immediate relief measure would be to delink Australia’s natural gas market from global markets for a limited period. </p>
<p>The only sure way to do this is by implementing a domestic gas reservation policy, which entails reserving a portion of Australian gas for domestic use, rather than exporting it. This must be nationally coordinated, as we have a strongly interconnected <a href="https://www.aemc.gov.au/energy-system/gas/gas-markets">national gas market</a>.</p>
<p>Western Australia uses its own isolated energy system and put a gas reservation <a href="https://www.wa.gov.au/government/publications/wa-domestic-gas-policy">policy in place</a> years ago, which seeks to make the equivalent of 15% of gas exports available for people in WA. This policy has helped <a href="https://theconversation.com/the-gas-trigger-wont-be-enough-to-stop-our-energy-crisis-escalating-we-need-a-domestic-reservation-policy-188057">mitigate price shocks</a>.</p>
<p>Since winning the election, Victorian Premier Daniel Andrews has <a href="https://www.afr.com/politics/emboldened-andrews-promises-to-lead-with-pm-20221127-p5c1kl">continued to urge</a> the federal government to impose such a policy Australia wide. Prime Minister Anthony Albanese should heed these calls. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-national-electricity-market-is-a-failed-1990s-experiment-its-time-the-grid-returned-to-public-hands-185418">The national electricity market is a failed 1990s experiment. It's time the grid returned to public hands</a>
</strong>
</em>
</p>
<hr>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/497572/original/file-20221128-20-ee63oq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Wind turbines in a field" src="https://images.theconversation.com/files/497572/original/file-20221128-20-ee63oq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/497572/original/file-20221128-20-ee63oq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/497572/original/file-20221128-20-ee63oq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/497572/original/file-20221128-20-ee63oq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/497572/original/file-20221128-20-ee63oq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/497572/original/file-20221128-20-ee63oq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/497572/original/file-20221128-20-ee63oq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Victoria has a 95% renewable electricity target by 2035.</span>
<span class="attribution"><span class="source">Alex Eckermann/Unsplash</span>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<h2>Steps to reduce emissions</h2>
<p>Our energy futures are intrinsically intertwined with addressing climate change. </p>
<p>The world has only <a href="https://www.theguardian.com/environment/2018/oct/08/global-warming-must-not-exceed-15c-warns-landmark-un-report">eight years left</a> for global warming to be limited to 1.5°C. This means accelerating the switch to renewable energy without any further delays. </p>
<p>Our first step must be to make <em>all</em> electricity renewable by 2035 in Victoria (and, indeed, in the rest of Australia). </p>
<p>Second, we need a transition to electric vehicles across all transport systems as fast as possible and well before 2040. The Andrews government is investing $100 million to decarbonise the state’s road transport sector, but the transition won’t be complete <a href="https://www.energy.vic.gov.au/renewable-energy/zero-emission-vehicles">until 2050</a>.</p>
<p>Third, hard-to-abate sectors – such as certain manufacturing operations, shipping and aviation – need ongoing technological development. </p>
<p>They require significant government support to progress clean fuels, likely based on the renewable <a href="https://theconversation.com/these-3-energy-storage-technologies-can-help-solve-the-challenge-of-moving-to-100-renewable-electricity-161564">hydrogen to ammonia</a> pathway. Victoria has a range of <a href="https://www.energy.vic.gov.au/__data/assets/pdf_file/0021/513345/Victorian-Renewable-Hydrogen-Industry-Development-Plan.pdf">hydrogen</a> and ammonia related industry development policies that show the government recognises this sector’s importance.</p>
<p>Ultimately, the incoming Victorian government’s promises address the first issue well, while making some headway on the second and third. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/497570/original/file-20221128-12-e7zvt5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Electric cars charging while parked" src="https://images.theconversation.com/files/497570/original/file-20221128-12-e7zvt5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/497570/original/file-20221128-12-e7zvt5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/497570/original/file-20221128-12-e7zvt5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/497570/original/file-20221128-12-e7zvt5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/497570/original/file-20221128-12-e7zvt5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/497570/original/file-20221128-12-e7zvt5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/497570/original/file-20221128-12-e7zvt5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The Andrews government aims to decarbonise road transport by 2050.</span>
<span class="attribution"><span class="source">AAP Image/Supplied by Lake Macquarie City Council</span></span>
</figcaption>
</figure>
<h2>The Victorian government must be brave</h2>
<p>We can’t rely on the rest of the world for innovation. Governments in Australia must play a more prominent role in infrastructure investment, technology research and development, energy industry development and significant market reform. </p>
<p>Tackling all these challenges isn’t really a job for a single state, particularly given Australia has one major east coast <a href="https://theconversation.com/whats-a-grid-anyway-making-sense-of-the-complex-beast-that-is-australias-electricity-network-185127">electricity grid</a> and one national energy framework.</p>
<p>The Victorian government cannot achieve any significant changes without working closely with other states and the federal government. In this, state governments must be brave and go against the past three decades of hands-off government approaches to essential energy infrastructure.</p>
<p>This isn’t a time for leaving things to the market to resolve. The Victorian government must take immediate and giant leaps to ensure a stable and climate-friendly energy sector.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/3-key-measures-in-the-suite-of-new-reforms-to-deal-with-australias-energy-crisis-184554">3 key measures in the suite of new reforms to deal with Australia's energy crisis</a>
</strong>
</em>
</p>
<hr>
<img src="https://counter.theconversation.com/content/195096/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ariel Liebman receives funding from the Australian Research Council, RACE for 2030 CRC, Engie, Data61/CSIRO. </span></em></p>The Andrews government has signalled a major shakeup of Victoria’s energy sector. But are they enough to bring the state’s energy prices down and reduce emissions?Ariel Liebman, Ariel Liebman Director, Monash Energy Institute and Professor of Sustainable Energy Systems, Faculty of Information Technology, Monash UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1882962022-08-12T11:07:15Z2022-08-12T11:07:15ZHistoric new deal puts emissions reduction at the heart of Australia’s energy sector<figure><img src="https://images.theconversation.com/files/478633/original/file-20220811-20-5piny7.jpg?ixlib=rb-1.1.0&rect=0%2C9%2C3264%2C1827&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Australia’s energy ministers on Friday <a href="https://www.energy.gov.au/government-priorities/energy-ministers/meetings-and-communiques">voted</a> to make emissions reduction a key national energy goal, in a major step forward in the clean energy transition.</p>
<p>Federal, state and territory energy ministers agreed to include emissions in what’s known as the “national energy objectives”. <a href="https://www.aemc.gov.au/regulation/neo#:%7E:text=The%20National%20Energy%20Retail%20Objective%20as%20stated%20in%20the%20National,security%20of%20supply%20of%20energy.%E2%80%9D">The objectives</a> guide rule-making and other decisions concerning electricity, retail energy and gas.</p>
<p>Announcing the deal on Friday, Climate Change and Energy Minister Chris Bowen said it was the first change to the objectives in 15 years. He added:</p>
<blockquote>
<p>This is important, it sends a very clear direction to our energy market operators, that they must include emissions reductions in the work that they do … Australia is determined to reduce emissions, and we welcome investment to achieve it and we will provide a stable and certain policy framework.</p>
</blockquote>
<p>The agreement comes not a moment too soon. To meet Australia’s net-zero goals, variable renewable energy capacity must <a href="https://aemo.com.au/-/media/files/major-publications/isp/2022/2022-documents/2022-integrated-system-plan-isp.pdf?la=en">increase</a> nine-fold by 2050. That means doubling Australia’s renewables capacity every decade. So let’s take a closer look at what the deal means. </p>
<h2>Prioritising emissions reduction</h2>
<p>A body called the Australian Energy Market Commission (AEMC) makes the rules for the electricity and gas market. It must refer to the national energy objectives to guide the formation of these rules. </p>
<p>The exclusion of emissions from the objectives meant the commission did not have to consider the long-term climate implications of the rules it set. Instead, the objectives mostly meant the commission considered the price, quality, safety, reliability and security of energy.</p>
<p>This limited scope meant some investment decisions by the commission were based on short-term economic grounds. For example, these old regulations <a href="https://reneweconomy.com.au/regulatory-madness-promotes-dirty-diesel-over-renewable-mini-grid-at-broken-hill/">required a transmission company</a> to maintain diesel generators rather than build a world-first clean energy mini-grid near Broken Hill, New South Wales. </p>
<p>Other jurisdictions worldwide already include sustainability objectives in electricity laws. </p>
<p>For example, a principal objective of the United Kingdom’s <a href="https://www.legislation.gov.uk/ukpga/1989/29/section/3A">Electricity Act 1989</a> requires officials to protect the interests of existing and future consumers. The first listed priority is the need to reduce greenhouse gas emissions from electricity supply. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-us-has-finally-passed-a-huge-climate-bill-australia-needs-to-keep-up-188525">The US has finally passed a huge climate bill. Australia needs to keep up</a>
</strong>
</em>
</p>
<hr>
<h2>What has its exclusion meant for projects?</h2>
<p>The environment used to be included in the <a href="https://reneweconomy.com.au/ministers-to-put-environment-into-energy-market-objective-in-landmark-move-for-renewables/">objectives</a>, but the Howard government removed it more than two decades ago. The move was a major setback for climate action and the transition to renewable energy.</p>
<p>The energy market operator <a href="https://www.aemc.gov.au/regulation/energy-rules/national-electricity-rules"><em>may</em> consider</a> the environmental or energy policies of participating jurisdictions to identify effects on the power system. But Friday’s deal means consideration of emissions would no longer be optional for the commission.</p>
<p>The traditional principles of efficiency and reliability are, of course, still crucial to energy systems. Yet, the <a href="https://theconversation.com/5-policy-decisions-from-recent-history-that-led-to-todays-energy-crisis-185207">ongoing energy crisis</a> shows we must invest in a suite of technologies to reach net-zero goals while assuring future energy security. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/why-did-gas-prices-go-from-10-a-gigajoule-to-800-a-gigajoule-an-expert-on-the-energy-crisis-engulfing-australia-184304">Why did gas prices go from $10 a gigajoule to $800 a gigajoule? An expert on the energy crisis engulfing Australia</a>
</strong>
</em>
</p>
<hr>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/478632/original/file-20220811-12-5piny7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Sheep beside solar panels" src="https://images.theconversation.com/files/478632/original/file-20220811-12-5piny7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/478632/original/file-20220811-12-5piny7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/478632/original/file-20220811-12-5piny7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/478632/original/file-20220811-12-5piny7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/478632/original/file-20220811-12-5piny7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/478632/original/file-20220811-12-5piny7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/478632/original/file-20220811-12-5piny7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Consideration of emissions will no longer be optional.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<h2>Ensuring the transition is fair</h2>
<p>Including emissions in investment decisions is crucial for planning the future of the National Electricity Market. Some states are making excellent progress. </p>
<p>For example, New South Wales has <a href="https://www.energy.nsw.gov.au/government-and-regulation/electricity-infrastructure-roadmap/about-roadmap#-renewable-energy-zones-">mapped</a> five “renewable energy zones” to replace ageing coal-fired generators. The roadmap’s objectives explicitly include improving “the affordability, reliability, security and sustainability of electricity supply”.</p>
<p>A successful energy transition must also consider <a href="https://icpac.medium.com/energy-and-climate-the-dilemma-trilemma-and-quadrilemma-839a8d657369">society’s values</a>. This includes consulting with landholders and communities about developing renewable energy projects on their land.</p>
<p>Making sure Australia’s transition is fair for everyone means prioritising people and their involvement. It also means getting a social licence for energy industry decisions. </p>
<p>The requirement to consider emissions in energy investment decisions may create further incentives for energy bodies to consider societal impacts. This is also reflected in Friday’s ministerial commitment to work on a co-designed First Nations clean energy strategy. </p>
<p>Considering climate impacts in energy financing and planning decisions is also crucial to the resilience of our energy systems. It will help ensure we don’t see a repeat of the Black Summer bushfires in 2019-2020, when entire sections of the national grid were <a href="https://www.energynetworks.com.au/news/media-releases/2020-media-releases/bushfire-impacts-on-electricity-networks/">destroyed</a>. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/farmers-shouldnt-have-to-compete-with-solar-companies-for-land-we-need-better-policies-so-everyone-can-benefit-173333">Farmers shouldn't have to compete with solar companies for land. We need better policies so everyone can benefit</a>
</strong>
</em>
</p>
<hr>
<h2>Aligning with our long-term interests</h2>
<p>This is a momentous period for Australia’s energy policy. The new federal government recently established Australia’s first offshore wind zone and is close to enshrining an emissions target in legislation. All this signals a long-needed embrace of the energy transition towards net zero. </p>
<p>This latest change increases this momentum. Importantly, it sends a direct signal for more investment net-zero technologies.</p>
<p>The international COP27 climate conference is due in November and Australia wants to co-host <a href="https://www.smh.com.au/environment/climate-change/so-you-want-to-host-a-cop-how-to-win-the-un-climate-talks-20220715-p5b208.html">COP29</a> in 2024 with our Pacific Island neighbours. With that in mind, our regulation must reflect our commitment to the energy transition – and this new deal is a crucially important step.</p><img src="https://counter.theconversation.com/content/188296/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Madeline Taylor has received funding from ACOLA and the AIEN. She is a Climate Councillor for the Climate Council and is on the Management Committee for RE-Alliance. </span></em></p>The important change sends a direct signal for more investment in renewable energy, and comes not a moment too soon.Madeline Taylor, Senior Lecturer, Macquarie UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1854182022-06-21T19:55:06Z2022-06-21T19:55:06ZThe national electricity market is a failed 1990s experiment. It’s time the grid returned to public hands<figure><img src="https://images.theconversation.com/files/469944/original/file-20220621-24-2eunm2.jpg?ixlib=rb-1.1.0&rect=0%2C28%2C6287%2C4151&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Dean Lewins/AAP</span></span></figcaption></figure><p>A crisis, as the saying has it, combines danger and opportunity. The dangers of the <a href="https://theconversation.com/australias-national-electricity-market-was-just-suspended-heres-why-and-what-happens-next-185136">current electricity crisis</a> are obvious. The opportunity it presents is to end to the failed experiment of the national electricity market.</p>
<p>Having suspended the market last week, the Australian Energy Market Operator (AEMO) is now directing generators when to supply electricity. It’s also paying them lavish compensation for the financial shortfalls they suffer as a result. </p>
<p>These emergency measures are unsustainable. But they provide the starting point for a restructured electricity supply industry – one that’s better balanced between markets and planning.</p>
<p>Now’s the time to create a national grid that serves the Australian public and meets the challenges of a warming world. A new government-owned and operated body should take control of Australia’s electricity system. And decarbonising the grid, while ensuring reliable and affordable energy, should be its core business. </p>
<figure class="align-center ">
<img alt="string of light bulbs in dark" src="https://images.theconversation.com/files/469945/original/file-20220621-19-mubsbk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/469945/original/file-20220621-19-mubsbk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=405&fit=crop&dpr=1 600w, https://images.theconversation.com/files/469945/original/file-20220621-19-mubsbk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=405&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/469945/original/file-20220621-19-mubsbk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=405&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/469945/original/file-20220621-19-mubsbk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=509&fit=crop&dpr=1 754w, https://images.theconversation.com/files/469945/original/file-20220621-19-mubsbk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=509&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/469945/original/file-20220621-19-mubsbk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=509&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Decarbonising the grid should be a key goal of electricity reforms.</span>
<span class="attribution"><span class="source">Dave Hunt/AAP</span></span>
</figcaption>
</figure>
<h2>Privatisation and poor design</h2>
<p>The national electricity market is where energy generators and retailers trade electricity. It was established about 25 years ago after technological advances allowed electricity grids to be connected across all states except Western Australia and the Northern Territory. </p>
<p>Before the market began, each state operated its own electricity industry with only limited interconnection. Back then, electricity companies were publicly owned. Most were also fully integrated, with one company responsible for the entire electricity supply chain, from generation to distribution and billing. </p>
<p>The national grid’s arrival coincided with the peak of enthusiasm for micro-economic reform. So, instead of a unified national enterprise, state utilities were broken up into separate parts – generation, transmission, distribution and retail – with the intention they would be privatised then engage in market competition. </p>
<p>Driving the trend towards privatisation was a widespread view that state-owned electricity enterprises had <a href="https://researchnow.flinders.edu.au/en/publications/nation-building-nationalisation-and-etsa">not performed well</a> – particularly in investing to expand access to electricity. </p>
<p>Reflecting this view, the industry became fully or mostly privatised in Victoria, South Australia and New South Wales. Other states opened electricity generation and retail to competition. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/whats-a-grid-anyway-making-sense-of-the-complex-beast-that-is-australias-electricity-network-185127">What's a grid, anyway? Making sense of the complex beast that is Australia's electricity network</a>
</strong>
</em>
</p>
<hr>
<p>The market was created just as the global need to reduce carbon emissions was being recognised. Despite this, the climate problem was not considered in the design of the market, which was based on a mix of coal and gas plants.</p>
<p>Until AEMO suspended the market last week, bids from generators determined the wholesale price of electricity at five-minute intervals. Retailers supplied electricity to consumers at prices that shielded them from the fluctuations in wholesale prices. </p>
<p>Prices typically sat around A$50 per megawatt hour. But in periods of very high electricity demand, the price can reach the market “price cap”, <a href="https://wattclarity.com.au/other-resources/explanations/glossary/market-price-cap/">currently set</a> at $15,100 per megawatt hour.</p>
<p>Meanwhile, electricity distribution – getting the power to homes and businesses using poles, wires and other infrastructure – was handed to a set of regulated monopolies, which were awarded high rates of return on low-risk assets.</p>
<figure class="align-center ">
<img alt="steam emitted from coal-fired power station" src="https://images.theconversation.com/files/469948/original/file-20220621-25-h52538.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/469948/original/file-20220621-25-h52538.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/469948/original/file-20220621-25-h52538.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/469948/original/file-20220621-25-h52538.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/469948/original/file-20220621-25-h52538.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/469948/original/file-20220621-25-h52538.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/469948/original/file-20220621-25-h52538.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The climate problem was not considered in the design of the market.</span>
<span class="attribution"><span class="source">Dan Himbrechts/AAP</span></span>
</figcaption>
</figure>
<h2>What went wrong</h2>
<p>The designers of the national electricity market hoped it would lead to better efficiency and more rational investment decisions. The market also aimed to lower consumer power bills and promote competitive retail offers tailored to individual needs. But none of this happened. </p>
<p>In fact, consumer electricity prices – after falling for the better part of a century in real terms under public ownership – <a href="https://www.aph.gov.au/about_parliament/parliamentary_departments/parliamentary_library/pubs/briefingbook44p/energyprices">rose dramatically</a>. </p>
<p>This was partly due to high returns to private electricity distribution companies, and the need for infrastructure investment to improve reliability. A proliferation of highly paid marketers, managers and financiers were also required to run the market. </p>
<p>Over time, the failures of the original design led to an alphabet soup of agencies needed to run the industry. They include AEMO, AEMC, AER, ARENA and a bunch of state-level regulators. Finally, the Turnbull government created the misnamed Energy Security Board (ESB), which sat on top of the whole process. </p>
<p>All this delayed the transition from an old and unreliable coal-based system to its necessary replacement by a combination of solar, wind and storage.</p>
<p>Now, this rickety system has failed to deal with a major supply crisis. The temptation is to slap on another patch and restore “normal” market conditions. The <a href="https://theconversation.com/why-including-coal-in-a-new-capacity-mechanism-will-make-australias-energy-crisis-worse-185404">ESB’s proposal</a> to pay coal and gas generators to be on standby if needed is one such quick fix. But much more comprehensive reform is needed.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/why-including-coal-in-a-new-capacity-mechanism-will-make-australias-energy-crisis-worse-185404">Why including coal in a new ‘capacity mechanism’ will make Australia's energy crisis worse</a>
</strong>
</em>
</p>
<hr>
<figure class="align-center ">
<img alt="composite image of electricity infrastructure and numbers" src="https://images.theconversation.com/files/469947/original/file-20220621-11-jhumxd.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/469947/original/file-20220621-11-jhumxd.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=228&fit=crop&dpr=1 600w, https://images.theconversation.com/files/469947/original/file-20220621-11-jhumxd.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=228&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/469947/original/file-20220621-11-jhumxd.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=228&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/469947/original/file-20220621-11-jhumxd.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=286&fit=crop&dpr=1 754w, https://images.theconversation.com/files/469947/original/file-20220621-11-jhumxd.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=286&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/469947/original/file-20220621-11-jhumxd.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=286&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The national electricity market has failed to achieve its key aims.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<h2>Where to from here?</h2>
<p>A combination of public and private investment is now needed to secure affordable electricity and transition to renewable energy generation.</p>
<p>The plethora of bodies regulating the market should be replaced by a single government agency that buys wholesale electricity from generators. This organisation could then sell electricity directly to customers or supply it to electricity retailers.</p>
<p>The emergency purchasing arrangements AEMO currently has in place should be replaced by “power purchase agreements”. These are long-term contracts between a buyer and a generator to purchase energy, in which prices, availability and reliability are set. </p>
<p>Within those terms, generators that consistently produce electricity at very low prices are the first to be called on. This dispatch method, known as merit order, has been <a href="https://reneweconomy.com.au/the-merit-order-effect-actually-its-a-good-thing-84129/">shown in Germany</a> to lead to lower prices for consumers.</p>
<p>At the same time, the Australian electricity grid should be returned to government ownership and operation. And its guiding principle should be moving to a decarbonised energy system, rather than the “<a href="https://aemo.com.au/-/media/files/major-publications/isp/2020/appendix--2.pdf?la=en">net market benefit</a>” test AEMO currently uses when deciding where to approve investment.</p>
<p>Labor’s Rewiring the Nation policy provides a starting point for reform. It should invest directly in the expanded transmission network needed to support the transition to renewable energy.</p>
<p>Australian energy policy took a wrong turn in the 1990s. It’s time to get back on course.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/in-an-energy-crisis-every-watt-counts-so-yes-turning-off-your-dishwasher-can-make-a-difference-185247">In an energy crisis, every watt counts. So yes, turning off your dishwasher can make a difference</a>
</strong>
</em>
</p>
<hr>
<img src="https://counter.theconversation.com/content/185418/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Quiggin is a former Member of the Climate Change Authority</span></em></p>It’s time for a national grid that serves the public and meets the challenges of a warming world. A new government-owned and operated body should take control of Australia’s electricity system.John Quiggin, Professor, School of Economics, The University of QueenslandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1854042022-06-21T03:07:11Z2022-06-21T03:07:11ZWhy including coal in a new ‘capacity mechanism’ will make Australia’s energy crisis worse<figure><img src="https://images.theconversation.com/files/469916/original/file-20220621-19-zm6z1k.jpg?ixlib=rb-1.1.0&rect=87%2C13%2C4405%2C2977&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Australia’s electricity generators would be paid extra money to be available even if they don’t actually generate any energy, under a <a href="https://www.datocms-assets.com/32572/1655620351-20220620-capacity-mechanism-high-level-design-consultation-paper_final.pdf">new mechanism</a> proposed by the federal government’s Energy Security Board (ESB). </p>
<p>Controversially, the ESB has recommended <em>all</em> generators be eligible for the payment, including ageing coal-fired generators that are increasingly breaking down.</p>
<p>The proposal comes after federal and state ministers last week <a href="https://www.energy.gov.au/sites/default/files/2022-06/Energy%20Ministers%20Meeting%20Communique%208%20Jun.docx">requested</a> the ESB advance its work on a “capacity mechanism … to bring on renewables and storage”. The ESB says a mix of generators is crucial for the mechanism to be effective, guaranteeing energy supply to the grid. </p>
<p>So will this capacity mechanism lower energy prices for households? Probably not, because it includes unreliable coal-fired power stations, and consumers are likely to pick up the cost when the plants ultimately fail. </p>
<h2>The electricity market is in crisis</h2>
<p>Wholesale electricity prices have surged due to two main factors: high coal and gas prices (driven by Russia’s invasion of Ukraine) and roughly one in four coal power stations being out of action at various times in the past few weeks. </p>
<p>The coal stations are unavailable because of maintenance as well as the sudden exit of <a href="https://www.afr.com/companies/energy/nearly-25pc-of-coal-capacity-remains-offline-despite-energy-crunch-20220606-p5argd">3,000 megawatts of power due to breakdowns</a>, with almost all Australian coal-fired power stations now older than their original design life.</p>
<p>The Australian Energy Market Operator has <a href="https://theconversation.com/australias-national-electricity-market-was-just-suspended-heres-why-and-what-happens-next-185136">suspended the market</a> in response to the crisis, and it’s unclear when it will restart. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/australias-national-electricity-market-was-just-suspended-heres-why-and-what-happens-next-185136">Australia's National Electricity Market was just suspended. Here's why and what happens next</a>
</strong>
</em>
</p>
<hr>
<p>Under the temporary system now in place, generators provide their availability and the market operator tells generators when to run to ensure secure supply. Market prices are then fixed at the past 28-day average for that hour of the day, between A$150 and $300 per megawatt hour. </p>
<p>If generation costs are higher, power station owners can apply for additional compensation, which will be later recovered from consumers. Unfortunately, this means all electricity customers will effectively subsidise the companies that own the unreliable coal generators that caused this crisis.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/469904/original/file-20220621-21-k6jyri.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/469904/original/file-20220621-21-k6jyri.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/469904/original/file-20220621-21-k6jyri.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=456&fit=crop&dpr=1 600w, https://images.theconversation.com/files/469904/original/file-20220621-21-k6jyri.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=456&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/469904/original/file-20220621-21-k6jyri.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=456&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/469904/original/file-20220621-21-k6jyri.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=573&fit=crop&dpr=1 754w, https://images.theconversation.com/files/469904/original/file-20220621-21-k6jyri.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=573&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/469904/original/file-20220621-21-k6jyri.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=573&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">AEMO last week suspended the National Electricity Market in response to the rising energy prices.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<h2>Would a capacity market have helped avoid this crisis?</h2>
<p>The short answer is no. The long answer is actually worse: a capacity market is likely to cause further crises such as the one we’re currently in.</p>
<p>The ESB suggests that selling “capacity certificates” three or four years in advance will mean coal generators will signal when they intend to close. But coal generators are unlikely to face penalties if they don’t turn up when needed - they will just hand back the extra payments they’ve received. </p>
<p>This sort of arrangement is what economists call a “free option” - it costs nothing to participate. If the coal stations fail to deliver, as they have done over the last two months, it will be left to consumers to deal with the consequences. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/as-the-world-battles-to-slash-carbon-emissions-australia-considers-paying-dirty-coal-stations-to-stay-open-longer-166814">As the world battles to slash carbon emissions, Australia considers paying dirty coal stations to stay open longer</a>
</strong>
</em>
</p>
<hr>
<p>By including all existing generators (including coal), a traditional capacity market is actually more likely to delay investment in new, fast-start, dispatchable technologies (such as batteries, pumped hydro and hydrogen-ready gas turbines) than accelerate them, as ministers want. </p>
<p>Indeed, ESB’s recommendation is already looking difficult to implement. Federal Energy Minister Chris Bowen says it will be <a href="https://reneweconomy.com.au/bowen-handballs-capacity-mechanism-fossil-fuel-choice-to-states/">up to the states</a> to choose which generators are eligible, and Victoria has <a href="https://www.abc.net.au/news/2022-06-20/capacity-mechanism/101166480">already said fossil fuels will not be</a>. </p>
<p>Most electricity suppliers also say they <a href="https://www.theaustralian.com.au/business/mining-energy/energy-industry-concerned-over-plan-for-power-reliability-mechanism/news-story/b37fcd317a7126485f3d6a351a1e0470">don’t want coal included</a>. </p>
<h2>What’s the real problem we’re trying to address?</h2>
<p>Any capacity mechanism needs to have a solution to unexpected and sudden shortfalls of capacity.</p>
<p>The ESB has noted the biggest risk to consumers is that coal will exit suddenly with little warning because it is old and prone to breaking down. This has been a significant contributing factor to the current crisis. </p>
<p>It also drove higher prices in 2017 when <a href="https://theconversation.com/hazelwood-closure-what-it-means-for-electricity-prices-and-blackouts-75135">Hazelwood suddenly closed</a> without sufficient time for investment in new capacity to be brought online. </p>
<p>The market operator <a href="https://aemo.com.au/-/media/files/electricity/nem/planning_and_forecasting/nem_esoo/2022/update-to-2021-electricity-statement-of-opportunities.pdf?la=en">didn’t foresee</a> any reliability problems less than two months ago - and neither did anyone in the market. The <a href="https://www.energy.gov.au/sites/default/files/2022-06/Capacity%20mechanism%20high-level%20design%20consultation%20paper.pdf">ESB’s proposed capacity market</a> would have implicitly recommended <em>less</em> capacity in the system.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/469899/original/file-20220621-21-cwsuqn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/469899/original/file-20220621-21-cwsuqn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/469899/original/file-20220621-21-cwsuqn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/469899/original/file-20220621-21-cwsuqn.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/469899/original/file-20220621-21-cwsuqn.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/469899/original/file-20220621-21-cwsuqn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/469899/original/file-20220621-21-cwsuqn.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/469899/original/file-20220621-21-cwsuqn.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Hazelwood workers left their hats on the power station’s last day.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<h2>A capacity mechanism needs to create a reserve</h2>
<p>As older coal power stations are increasingly unreliable, it may be prudent to have new generation in place <em>before</em> coal power stations fail. </p>
<p>Governments should create a capacity reserve market. Effectively, a capacity reserve pays new generators for new capacity until it’s needed, whereas a traditional capacity market (like the ESB is recommending) pays all existing generators that would have been available anyway. This is the key difference between a capacity market and a capacity reserve. </p>
<p>Under a capacity reserve, governments could provide payments only to new, modern, reliable, fast-start, firm capacity such as batteries, hydrogen-ready gas turbines and pumped hydro. This could be brought into a “waiting room” and held until it’s needed.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/australias-energy-crisis-3-ways-the-albanese-government-can-ease-pressure-on-your-power-bills-184134">Australia's energy crisis: 3 ways the Albanese government can ease pressure on your power bills</a>
</strong>
</em>
</p>
<hr>
<p>New generators could be deployed immediately when coal power stations fail, helping prevent the type of crisis we’re going through now. </p>
<p>Importantly, consumers would only be paying for <em>new</em> generation, not coal-fired power stations. This will cost less, and is the only way to provide the insurance the market needs.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/469900/original/file-20220621-22-zbzr0o.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Wind turbines in a field at sunset" src="https://images.theconversation.com/files/469900/original/file-20220621-22-zbzr0o.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/469900/original/file-20220621-22-zbzr0o.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/469900/original/file-20220621-22-zbzr0o.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/469900/original/file-20220621-22-zbzr0o.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/469900/original/file-20220621-22-zbzr0o.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/469900/original/file-20220621-22-zbzr0o.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/469900/original/file-20220621-22-zbzr0o.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Ministers want a smooth transition to renewables.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<h2>We already have the tools in place</h2>
<p>Several years ago, the ESB introduced the <a href="https://www.aer.gov.au/retail-markets/retailer-reliability-obligation">Retail Reliability Obligation</a>, which requires retailers to hold contracts with generators for their share of peak electricity demand. This is intended to encourage retailers to plan ahead. </p>
<p>The Retail Reliability Obligation framework could be modified to address situations such as what we’re in now. </p>
<p>If coal-fired generators fail and the market operator is forced to intervene like it did last week, then any costs the market operator incurred could be recovered from the retailers without enough generation or contracts in place to supply all of their customers. </p>
<p>This would be better than today, where the operator’s costs are recovered from all electricity consumers.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/in-an-energy-crisis-every-watt-counts-so-yes-turning-off-your-dishwasher-can-make-a-difference-185247">In an energy crisis, every watt counts. So yes, turning off your dishwasher can make a difference</a>
</strong>
</em>
</p>
<hr>
<p>By strengthening price signals and building some reserves, we can help prevent future crises and deliver what ministers have <a href="https://view.officeapps.live.com/op/view.aspx?src=https%3A%2F%2Fwww.energy.gov.au%2Fsites%2Fdefault%2Ffiles%2F2022-06%2FEnergy%2520Ministers%2520Meeting%2520Communique%25208%2520Jun.docx">rightly requested</a>: a smooth pathway to more renewables and storage. </p>
<p>It’s also worth remembering coal-fired generators received a windfall of up to $5 billion under the <a href="http://www.cleanenergyregulator.gov.au/Infohub/Data-and-information/Pages/Coal-fired-generation-units.aspx">Clean Energy Future</a> package in 2012. How much more money do coal generators need from taxpayers and energy consumers to simply do the right thing and make their plant reliable? Or to shut it down with sufficient notice to allow new capacity to be built?</p><img src="https://counter.theconversation.com/content/185404/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Tim Nelson is an Associate Professor at Griffith University and the EGM, Energy Markets at Iberdrola Australia, that develops renewable projects and batteries</span></em></p><p class="fine-print"><em><span>Joel Gilmore is an Associate Professor at Griffith University and the GM Energy Policy & Planning at Iberdrola Australia, that develops renewable projects and batteries</span></em></p>Paying coal-fired power stations to stay open means consumers will be picking up the cost when they ultimately fail.Tim Nelson, Associate Professor of Economics, Griffith UniversityJoel Gilmore, Associate Professor, Griffith UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1852032022-06-20T06:03:32Z2022-06-20T06:03:32ZShould Australian governments nationalise the electricity sector? It’s not that simple<p>The shock suspension last week of Australia’s wholesale electricity market rekindled an age-old debate about whether the energy sector should be nationalised – in other words, owned and controlled by government.</p>
<p>The calls came after electricity prices spiked and supply tightened along Australia’s east coat, triggering a chain of events which eventually forced the Australian Energy Market Operator (AEMO) to suspend the national electricity market.</p>
<p>So should the flow of energy in Australia come under public control? And even if it’s feasible, would it prevent crises like the one we’ve just seen?</p>
<p>I’m an academic in energy economics with a special interest in <a href="http://www.uq.edu.au/economics/abstract/541.pdf">electricity network privatisation</a>. As my work has revealed, nationalising electricity is not a silver bullet. To operate most effectively, the sector needs to balance the roles of private competition and government regulation.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1536983447322783749"}"></div></p>
<h2>What’s caused the energy crisis?</h2>
<p>A recent cold snap meant more people were turning on their heaters, so using more electricity. Compounding that, prices on the wholesale electricity market – where generators are paid for the power they produce – surged for two reasons.</p>
<p>First, Russia’s invasion of Ukraine has <a href="https://theconversation.com/energy-bills-are-spiking-after-the-russian-invasion-we-should-have-doubled-down-on-renewables-years-ago-179336">driven up</a> global coal and gas prices.</p>
<p>Second, about a quarter of coal power stations feeding the national grid were <a href="https://www.theguardian.com/australia-news/2022/jun/15/electricity-trading-suspended-as-energy-supply-crisis-deepens-across-australias-east-coast">offline</a> due to unplanned outages or maintenance. At times, renewable energy outputs also fell.</p>
<p>All this caused wholesale electricity prices to surge, which prompted AEMO to impose a cap on prices. The capped price was less than it costs some plants to generate power, prompting them to withdraw their capacity from the market. The situation became impossible for AEMO to manage so it stepped in to suspend the market indefinitely to prevent disastrous blackouts.</p>
<p>Generators must now supply the market with electricity and will be compensated for losses.</p>
<h2>Public vs private</h2>
<p>The national electricity market was created in 1998, and comprises electricity generation, transmission, distribution and retailers. It covers all states and territories except Western Australia and the Northern Territory, and delivers around 80% of the nation’s electricity.</p>
<p>Since the 1990s, state governments have tended to sell off power assets to private operators. The system is now privatised to varying degrees.</p>
<p>In Western Australia, Tasmania and the Northern Territory, electricity supply is fully owned by state governments. In Queensland, the state government owns most of the electricity supply system and only the retail market has been privatised.</p>
<p>The electricity system is mostly privatised in Victoria and South Australia, and partially privatised in New South Wales. However, governments still <a href="https://www.aer.gov.au/system/files/State%20of%20the%20energy%20market%202021%20-%20Full%20report_1.pdf">regulate electricity prices</a> in Victoria, the Australian Capital Territory, Tasmania and regional Queensland.</p>
<p>The energy market suspension isn’t the only energy crisis Australia has faced in recent times. In 2016, the South Australian power market – a mostly privatised system – was <a href="https://www.aer.gov.au/wholesale-markets/compliance-reporting/investigation-report-into-south-australias-2016-state-wide-blackout">suspended for 13 days</a>.</p>
<p>Energy supply and affordability crises in the national electricity market have <a href="https://www.etuvic.com.au/Documents/Campaigns/Electricity_Privatisation_Report.pdf">increasingly</a> <a href="https://theconversation.com/the-case-for-renationalising-australias-electricity-grid-73951">coincided</a> with growing private ownership.</p>
<p>Western Australia, which isn’t part of the national market and has a system featuring significant <a href="https://theconversation.com/want-a-solution-for-the-energy-crisis-gripping-australias-east-look-west-185124">state intervention in gas supply</a>, has avoided the energy crisis currently gripping the eastern states.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1537374731887857664"}"></div></p>
<p><a href="https://www.sciencedirect.com/science/article/abs/pii/S0313592615300011">My research</a> found privatisation can lead to improved energy market efficiency, but only if coupled with strong regulation of the sector. This suggests states with fully privatised energy markets should shift to more government involvement. It also suggests public-owned states should privatise some assets.</p>
<p>Nationalising isn’t a silver bullet. That’s because market outcomes are the best outcomes for consumers if the market is functioning well. Having competition is the best way to bring retail and wholesale costs down.</p>
<p>But if electricity prices are so high that some consumers can’t afford it, it’s the responsibility of government to provide electricity to them – through subsidies, for instance.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/whats-a-grid-anyway-making-sense-of-the-complex-beast-that-is-australias-electricity-network-185127">What's a grid, anyway? Making sense of the complex beast that is Australia's electricity network</a>
</strong>
</em>
</p>
<hr>
<h2>Markets and government should co-exist</h2>
<p>Experience from energy markets overseas shows that for a complicated industry like electricity to work, markets and government policies should co-exist. </p>
<p>Chile’s power supplies were state-owned until 1982. Then, it became the <a href="https://openknowledge.worldbank.org/bitstream/handle/10986/22211/A0quarter0cent0developing0countries.pdf?sequence=1&isAllowed=y">first country in the world</a> to adopt a competitive power sector by establishing a wholesale electricity market. Today, that market is <a href="https://www.sciencedirect.com/science/article/pii/S2211467X21001814">well-functioning</a> because energy prices tend to reflect the long-term costs of producing electricity. </p>
<p>The success of this privately owned system is due to strong government-initiated reforms. They include effective regulation of transmission and distribution networks, strengthening sector institutions and modifying auction rules in the wholesale market to encourage new bidders.</p>
<p>Chile has also become a <a href="https://energytransition.org/2021/05/good-news-from-chile/">renewable energy champion</a> while having a privatised electricity system, because market reforms were supported by policies to promote clean energy.</p>
<p>Other Latin American countries with market-based electricity systems, such as <a href="https://publications.iadb.org/publications/english/document/Privatization-Institutional-Reform-and-Performance-in-the-Latin-American-Electricity-Sector.pdf">Argentina</a>, also allowed for varying degrees of government involvement to make the market work. </p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1537538213782474754"}"></div></p>
<p>As climate change worsens and countries struggle to reduce their greenhouse gas emissions, market-based electricity systems will become more <a href="https://www.sciencedirect.com/science/article/abs/pii/S0313592615000090">difficult</a>.</p>
<p>Everyone pays the cost of emissions in the form of global warming. But these costs aren’t factored into the costs of generating electricity. So without a carbon price, there’s little incentive for generators in an entirely privatised market to reduce their emissions.</p>
<p>The United Kingdom has recognised this. It has significantly intervened in the electricity market by <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/324176/Implementing_Electricity_Market_Reform.pdf">introducing</a> a mechanism to keep prices stable for consumers, and guaranteeing extra capacity in times of tight supply.</p>
<p>This helps to meet its climate change objectives by preventing supply shortfalls during the transition to renewables.</p>
<h2>What lies ahead?</h2>
<p>Australia’s National Electricity Market lacks the right balance between state and market. </p>
<p>The strong push towards the market that began in the early 1990s in Victoria, South Australia and New South Wales now needs to be clawed back somewhat. And in Queensland and Tasmania where markets can be established, this should be done – with policies to support energy security and environmental sustainability. </p>
<p>The experience of the UK and Latin America with partly state-owned electricity systems suggests Australia should not be sceptical of such reforms.</p>
<p>Active government involvement in the electricity sector is necessary for Australia to meet its ambitious climate targets, but this doesn’t mean totally abandoning the power of market forces.</p><img src="https://counter.theconversation.com/content/185203/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Rabindra Nepal does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Active government involvement in the electricity sector is necessary for Australia to meet its ambitious climate targets. But we shouldn’t totally abandon the power of market forces.Rabindra Nepal, Associate Professor of Economics, University of WollongongLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1851272022-06-17T05:15:59Z2022-06-17T05:15:59ZWhat’s a grid, anyway? Making sense of the complex beast that is Australia’s electricity network<figure><img src="https://images.theconversation.com/files/469406/original/file-20220617-15-u229iw.jpg?ixlib=rb-1.1.0&rect=7%2C7%2C5104%2C3395&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>News about the energy crisis engulfing Australia’s east coast seems inescapable. Terms such as “grid”, the “National Electricity Market” and “transmission” are being tossed around alongside the frightening prospect of soaring power bills – but what does it all mean?</p>
<p>Here, I break down a few of the terms and ideas underpinning this unprecedented event to help you make sense of it.</p>
<h2>What is the electricity grid and how does it work?</h2>
<p>An electricity grid doesn’t refer to any specific location, but is a network that delivers electricity from producers to consumers through a series of poles and wires spanning the continent. </p>
<p>The National Electricity Market is one such interconnected grid. Contrary to its name, it doesn’t cover the entire nation, only Australia’s east and south: New South Wales, the Australian Capital Territory, Queensland, South Australia, Victoria and Tasmania. </p>
<p>Each time you switch on the light, heater, or toaster, you’re using electricity that arrives to your home via this network. </p>
<hr>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/470458/original/file-20220623-51670-frq711.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/470458/original/file-20220623-51670-frq711.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=1142&fit=crop&dpr=1 600w, https://images.theconversation.com/files/470458/original/file-20220623-51670-frq711.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=1142&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/470458/original/file-20220623-51670-frq711.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=1142&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/470458/original/file-20220623-51670-frq711.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1435&fit=crop&dpr=1 754w, https://images.theconversation.com/files/470458/original/file-20220623-51670-frq711.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1435&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/470458/original/file-20220623-51670-frq711.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1435&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption"></span>
<span class="attribution"><span class="source">Wes Mountain/The Conversation</span>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span>
</figcaption>
</figure>
<hr>
<p>Power is carried from electricity generators (coal-fired power stations, gas plants, wind and solar farms) to retailers (the company charging your power bills) to your home or business via “inter-connectors” (high voltage towers, undersea cable).</p>
<p>Inter-connectors are particularly important when the demand for electricity in a region is higher than what a local generator can supply, such as during cold snaps or heatwaves. Then, a supplier in a neighbouring region can step in to fill demand using the inter-connectors. </p>
<p>Neighbouring suppliers can also step in if their electricity prices are lower than local suppliers’.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/want-a-solution-for-the-energy-crisis-gripping-australias-east-look-west-185124">Want a solution for the energy crisis gripping Australia's east? Look west</a>
</strong>
</em>
</p>
<hr>
<h2>Why do energy prices fluctuate throughout the day?</h2>
<p>Energy prices rely heavily on demand. The more electricity is needed, the more expensive it is. And clearly, demand fluctuates throughout the day. </p>
<p>During cold winter months electricity demand is expected to increase as people switch on their heaters. During hot summer months, switching on air conditioners also leads to increased electricity demand. </p>
<p>The winter demand typically experiences two daily peaks: in the cold morning and evening hours, when most people use their heaters. The demand during the day, when the outside temperatures are relatively high, drops to a lower level. </p>
<p>Likewise, the summer demand usually peaks during hot afternoon hours, when most people use their coolers and air-conditioners.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/why-did-gas-prices-go-from-10-a-gigajoule-to-800-a-gigajoule-an-expert-on-the-energy-crisis-engulfing-australia-184304">Why did gas prices go from $10 a gigajoule to $800 a gigajoule? An expert on the energy crisis engulfing Australia</a>
</strong>
</em>
</p>
<hr>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/469405/original/file-20220617-19-a1fsqs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/469405/original/file-20220617-19-a1fsqs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/469405/original/file-20220617-19-a1fsqs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/469405/original/file-20220617-19-a1fsqs.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/469405/original/file-20220617-19-a1fsqs.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/469405/original/file-20220617-19-a1fsqs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/469405/original/file-20220617-19-a1fsqs.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/469405/original/file-20220617-19-a1fsqs.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Energy prices are higher in the morning and evening in winter when more people use their heaters.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<h2>How are energy supply and prices determined?</h2>
<p>The National Electricity Market is not only a physical grid, but also plays the role of a wholesale market which facilities the exchange of energy between generators and retailers. </p>
<p>Because electricity can’t be stored easily, energy supply and demand is matched instantaneously, in real time. </p>
<p>Generators submit their offers to supply the market with a certain amount of energy for a certain period of time. The Australian Energy Market Operator then decides which generators to deploy, starting with the cheapest. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/australias-national-electricity-market-was-just-suspended-heres-why-and-what-happens-next-185136">Australia's National Electricity Market was just suspended. Here's why and what happens next</a>
</strong>
</em>
</p>
<hr>
<p>Retailers buy energy from generators at a wholesale price, which is extremely volatile because of sharp unpredictable increases in energy demand and, therefore, price. </p>
<p>Retailers then resell the electricity to businesses and households. Consumers pay a more-or-less fixed price for power. But since retailers need to mitigate their risks related to the extremely volatile wholesale prices, they incorporate this risk into consumers bills. </p>
<p>Indeed, wholesale prices have historically <a href="https://theconversation.com/australias-energy-crisis-3-ways-the-albanese-government-can-ease-pressure-on-your-power-bills-184134">represented around 35%</a> of the final bill for households.</p>
<p>But retailers can’t go overboard – energy prices in the National Electricity Market are regulated by state and federal laws. Though, retailers are allowed to make a reasonable margin. </p>
<h2>I have rooftop solar. How am I affected by the current price spikes and shortages?</h2>
<p>By installing a rooftop solar, households are expected to escape any sharp increases to their energy bills, and even save <a href="https://www.energyaustralia.com.au/blog/better-energy/why-solar-panels-alone-cant-power-your-house">around 30% to 60%</a>.</p>
<p>This results in return on investment into rooftop solar system in three to seven years, depending on the location, and usage time, shading, roof direction and inclination. </p>
<p>So it’s not surprising soaring power prices have led to <a href="https://www.afr.com/companies/energy/electricity-prices-powering-huge-increase-in-demand-for-solar-20220603-p5aqwt">increasing demand</a> for solar panels. </p>
<p>Households can make the most of their solar panel system by adding battery storage – technology that allows you to store any extra electricity your rooftop solar generates – to maintain electricity supply during grid blackouts. Batteries, however, are expensive, which means this option might not be very cost-effective just yet. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/469407/original/file-20220617-19-xcwg03.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/469407/original/file-20220617-19-xcwg03.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/469407/original/file-20220617-19-xcwg03.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/469407/original/file-20220617-19-xcwg03.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/469407/original/file-20220617-19-xcwg03.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/469407/original/file-20220617-19-xcwg03.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/469407/original/file-20220617-19-xcwg03.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/469407/original/file-20220617-19-xcwg03.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Installing rooftop solar can offset the price hikes in electricity bills.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<h2>Could price gouging be impacting energy prices?</h2>
<p>The increase in energy prices is mainly driven by the increasing global cost of fossil fuels, inflation, and supply chain disruption. But it’s also likely electricity generators are taking further advantage of the situation by price gouging in the National Electricity Market. </p>
<p>This is a situation when generators try to withhold some supply to get higher payments later, making so-called “windfall” profits. It is the energy regulator’s responsibility to look closely into this issue. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/australia-already-has-a-uk-style-windfall-profits-tax-on-gas-but-well-give-away-tens-of-billions-of-dollars-unless-we-fix-it-soon-184938">Australia already has a UK-style windfall profits tax on gas – but we'll give away tens of billions of dollars unless we fix it soon</a>
</strong>
</em>
</p>
<hr>
<h2>Can electricity prices in Australia go down in the short term?</h2>
<p>The outlook isn’t very optimistic and we probably won’t see electricity prices decline in the next few weeks or months.</p>
<p>The challenging global environment (largely due to Russia’s invasion of Ukraine), the shutdown of coal-fired power plants in Australia, limited generating capacity, and the <a href="https://theconversation.com/why-is-it-so-cold-right-now-and-how-long-will-it-last-a-climate-scientist-explains-184155">colder than usual</a> start to winter, are creating extreme demand conditions. </p>
<p>These challenges aren’t going away any time soon, and will likely result in even larger price spikes in the future. </p>
<p>Fortunately, the Australian Energy Market Operator has taken the extraordinary measure to bring some stability to the energy sector by <a href="https://theconversation.com/australias-national-electricity-market-was-just-suspended-heres-why-and-what-happens-next-185136">temporary suspending</a> the normal market operations. </p>
<p>This will reduce the risks of blackouts or supply shortfalls. It will also provide transparency on how generators operate, preventing them from price gouging. </p>
<p>Once we reach some stability, ensuring uninterrupted power supply to Australians, ways to reduce energy cost should be explored. This will take a number of months.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/469404/original/file-20220617-12-q2za9z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Transmission towers at sunset" src="https://images.theconversation.com/files/469404/original/file-20220617-12-q2za9z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/469404/original/file-20220617-12-q2za9z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/469404/original/file-20220617-12-q2za9z.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/469404/original/file-20220617-12-q2za9z.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/469404/original/file-20220617-12-q2za9z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/469404/original/file-20220617-12-q2za9z.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/469404/original/file-20220617-12-q2za9z.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Transmission towers carry electricity around the country.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<h2>Would having more renewable energy help?</h2>
<p>The Labor government plans to significantly increase the share of renewables in the National Electricity Market, to 82% by 2030.</p>
<p>More renewable energy in the grid could certainly reduce energy prices in the medium to long term – it’s the most cost-effective way to generate electricity, and as Australia’s produces its own renewable energy, we’ll be better shielded from global market issues.</p>
<p>But transitioning from fossil-fuel generation to renewables <a href="https://theconversation.com/5-policy-decisions-from-recent-history-that-led-to-todays-energy-crisis-185207">will be difficult</a>, as it requires building significant new infrastructure, which takes time. </p>
<p>So while Australia transitions to clean energy, it’s imperative to set up a short-term strategy to ensure the sector is sustainable. This could include government investment in dispatchable generation – energy that can be dispatched to consumers on demand.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/5-policy-decisions-from-recent-history-that-led-to-todays-energy-crisis-185207">5 policy decisions from recent history that led to today's energy crisis</a>
</strong>
</em>
</p>
<hr>
<img src="https://counter.theconversation.com/content/185127/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Katja Ignatieva does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>What is the electricity grid and how does it work? How are energy supply and prices determined? An expert breaks down a few of the terms and ideas underpinning Australia’s energy crisis.Katja Ignatieva, Associate Professor, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1851362022-06-15T08:47:41Z2022-06-15T08:47:41ZAustralia’s National Electricity Market was just suspended. Here’s why and what happens next<p>Australia’s energy market operator has <a href="https://aemo.com.au/newsroom/media-release/aemo-suspends-nem-wholesale-market">just suspended</a> the National Electricity market. That means instead of the price for wholesale electricity being set competitively, the market operator (AEMO) sets fixed prices and will take a greater role in directing which power stations generate energy and when. </p>
<p>This is the first time the market has been suspended across all states, and reflects the depth of the price and supply crisis plaguing Australia’s biggest electricity grid.</p>
<h2>How did we get here?</h2>
<p>All electricity on Australia’s east coast is traded through the National Electricity Market (NEM), a wholesale market where generators are paid for the electricity they produce. Prices are set by an auction between generators held every five minutes. </p>
<p>Prices typically average around $A80/MWh (per megawatt hour), but can vary between -$1000/MWh (where generators actually pay to stay online) and $15,100/MWh. Retailers buy the energy from this auction and manage the price risk on behalf of households and energy-using businesses. </p>
<p>Over the past week, wholesale prices surged due to two main factors: high coal and gas prices (driven by the Russian invasion of Ukraine) and roughly 25% of coal power stations being out of action. The coal power stations are unavailable because of maintenance as well as the sudden exit of 3,000 MW of power due to breakdowns (unplanned outages). </p>
<p>This led AEMO to trigger a pricing “safety net” and capping prices at $300/MWh (much less than the normal cap of $15,100/MWh). </p>
<p>Unfortunately, $300/MWh is currently less than the cost of generating power from gas power stations and possibly even some coal power stations. Some generators subsequently withdrew their availability from the market, leading to further shortfalls. </p>
<p>The low price cap also meant there were weaker price signals as to when power stations with limited “fuel” should use it. This includes some diesel generators as well as batteries and hydro.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/if-the-opposition-wants-a-mature-discussion-about-nuclear-energy-start-with-a-carbon-price-without-that-nuclear-is-wildly-uncompetitive-184471">If the opposition wants a mature discussion about nuclear energy, start with a carbon price. Without that, nuclear is wildly uncompetitive</a>
</strong>
</em>
</p>
<hr>
<figure class="align-center ">
<img alt="Power lines" src="https://images.theconversation.com/files/371892/original/file-20201130-15-1d3xz5t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/371892/original/file-20201130-15-1d3xz5t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=338&fit=crop&dpr=1 600w, https://images.theconversation.com/files/371892/original/file-20201130-15-1d3xz5t.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=338&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/371892/original/file-20201130-15-1d3xz5t.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=338&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/371892/original/file-20201130-15-1d3xz5t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=424&fit=crop&dpr=1 754w, https://images.theconversation.com/files/371892/original/file-20201130-15-1d3xz5t.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=424&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/371892/original/file-20201130-15-1d3xz5t.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=424&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The electricity wholesale market has been suspended.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<p>All this makes it much harder for AEMO to operate the market. On Tuesday, AEMO was forced to direct power stations when to run and when not to run. This intervention applied to roughly 20% of demand yesterday, or 5,000 megawatts. </p>
<p>AEMO has now decided suspending the market will make it simpler to operate the grid during this crisis. Generators will now provide their availability and AEMO will tell generators when to run to ensure secure supply. Market prices are then fixed at the average of the past 28 days for that hour of the day - between $150/MWh and $300/MWh across the day. </p>
<p>If generation costs are higher, power station owners will be able to apply for <a href="https://aemo.com.au/en/energy-systems/electricity/emergency-management/guide-to-market-suspension-in-the-nem">additional compensation</a>, which will be later recovered from consumers.</p>
<p>Although this is the first time it has been done nationally, AEMO has previously suspended the market in individual states such as in <a href="https://www.aemo.com.au/-/media/files/electricity/nem/market_notices_and_events/market_event_reports/2022/preliminary-report-sa-market-suspension.pdf">South Australia</a> this year when control systems failed.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1536955611304558592"}"></div></p>
<h2>What’s likely to happen next?</h2>
<p>AEMO will continue to monitor the system, and will restart the market when it is appropriate.</p>
<p>This has been a perfect storm of factors – high input costs, significant capacity being unavailable, and a cold snap with high demand. It’s not clear any market would have been able to handle these extreme conditions unless the generation in the market is more modern and less susceptible to breaking down. </p>
<p>What this does point to is that, longer-term, it may be time to buy some insurance for the energy market, as energy ministers have <a href="https://theconversation.com/3-key-measures-in-the-suite-of-new-reforms-to-deal-with-australias-energy-crisis-184554">proposed</a>. This would help manage periods like this when so much capacity is unexpectedly offline. </p>
<p>Although coal owners are advocating for <a href="https://theconversation.com/paying-australias-coal-fired-power-stations-to-stay-open-longer-is-bad-for-consumers-and-the-planet-160083">additional payments</a>, it’s clear this would not have helped avoid the current crisis. As AEMO CEO Daniel Westerman <a href="https://www.youtube.com/watch?v=-ljN2KE8wGI">pointed out</a>, coal plant reliability is “slowly declining”. </p>
<p>This crisis shows we need to make sure we have modern new plant (like batteries and gas turbines), not ageing coal power stations. We also need reserves for when coal unexpectedly breaks down and for other extreme events. This means investing in new flexible capacity which is ready for when we need it.</p>
<figure class="align-center ">
<img alt="A coal fired power station" src="https://images.theconversation.com/files/371893/original/file-20201130-21-1p3kr49.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/371893/original/file-20201130-21-1p3kr49.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/371893/original/file-20201130-21-1p3kr49.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/371893/original/file-20201130-21-1p3kr49.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/371893/original/file-20201130-21-1p3kr49.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/371893/original/file-20201130-21-1p3kr49.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/371893/original/file-20201130-21-1p3kr49.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The very high cost of coal and gas is driving up energy bills.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<h2>What does it mean for energy users?</h2>
<p>These extreme prices in the National Electricity Market will ultimately impact on energy consumers, particularly larger energy users. Households are already being hit by up to a <a href="https://www.abc.net.au/news/2022-05-26/benchmark-power-prices-electricity-bills-to-soar-australia/101098128">20% rise</a> in bills next month due to the <a href="https://theconversation.com/4-reasons-our-gas-and-electricity-prices-are-suddenly-sky-high-184303">very high cost</a> of coal and gas.</p>
<p>Given the stresses on the grid, however, it’s sensible for Australians on the east cost to conserve energy if safe to do so, particularly during the peak hours of 5-8pm. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/if-youre-renting-chances-are-your-home-is-cold-with-power-prices-soaring-heres-what-you-can-do-to-keep-warm-184472">If you're renting, chances are your home is cold. With power prices soaring, here's what you can do to keep warm</a>
</strong>
</em>
</p>
<hr>
<img src="https://counter.theconversation.com/content/185136/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Joel Gilmore is an Associate Professor at Griffith University and General Manager Energy Policy & Planning at Iberdrola Australia, which develops renewable projects and batteries.</span></em></p><p class="fine-print"><em><span>Tim Nelson is an Associate Professor at Griffith University and the EGM, Energy Markets at Iberdrola Australia, which develops renewable projects and batteries.</span></em></p>Australia’s energy market operator has suspended the National Electricity Market, due to a perfect storm of coal plants going offline and a spike in fossil fuel prices.Joel Gilmore, Associate Professor, Griffith UniversityTim Nelson, Associate Professor of Economics, Griffith UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1847432022-06-14T19:58:00Z2022-06-14T19:58:00Z‘We want to be part of that movement’: residents embrace renewable energy but worry how their towns will change<figure><img src="https://images.theconversation.com/files/468665/original/file-20220614-11-ztvr06.jpg?ixlib=rb-1.1.0&rect=0%2C8%2C2995%2C1985&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Amid soaring energy costs, the new Labor government is working to deliver a <a href="https://alp.org.au/policies/rewiring_the_nation">A$20 billion pledge</a> to rebuild and modernise Australia’s electricity grid. It will help deliver <a href="https://www.aemo.com.au/energy-systems/major-publications/integrated-system-plan-isp/2022-integrated-system-plan-isp">a plan</a> for 122 gigawatts of new renewable energy in the National Electricity Market by 2050, eventually replacing coal generation.</p>
<p>The transition will bring significant social, economic and environmental change. Electricity generation in New South Wales, for example, will shift from the concentrated coal power of the Hunter Valley and Central Coast to multiple sites across the state’s centre, north and southwest. </p>
<p>The shift also entails a host of new infrastructure. According to our calculations, the predicted extra renewable energy capacity will require nationally 24,000 large wind turbines or around 2,000 large solar farms, as well as new large-scale batteries. </p>
<p>So, in the <a href="https://australiainstitute.org.au/report/renewables-rural-australia/">first major study</a> of its kind, we travelled to where renewable energy is expanding in NSW to ask communities how they feel about the changes. While their outlook was generally positive, governments can do more to ensure community support for the transition. </p>
<figure class="align-center ">
<img alt="girl looks at wind turbines" src="https://images.theconversation.com/files/468661/original/file-20220614-12-quifw5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/468661/original/file-20220614-12-quifw5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/468661/original/file-20220614-12-quifw5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/468661/original/file-20220614-12-quifw5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/468661/original/file-20220614-12-quifw5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/468661/original/file-20220614-12-quifw5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/468661/original/file-20220614-12-quifw5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The renewables transition will bring significant social, economic and environmental change.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<h2>What our work involved</h2>
<p>Most new energy infrastructure will be concentrated in designated “<a href="https://www.energy.nsw.gov.au/sites/default/files/2020-12/UpdatedFactsheet_202012.pdf">renewable energy zones</a>”. These are areas where both renewable energy is generated, and the high-voltage poles and wires exist to deliver it where needed.</p>
<p>The national pilot zone will begin in NSW’s Central-West Orana region from 2023, followed by another zone in New England. Three more zones will be established in the Riverina, Hunter-Central Coast and Illawarra regions.</p>
<p>Our research involved travelling to and staying in affected towns including Wellington, Glen Innes, Inverell, and Uralla. New wind and solar farms are already built near these places and many more are proposed in the coming years in the Central-West Orana and New England.</p>
<p>We spoke to a broad range of residents. All together we conducted 44 semi-structured interviews, several group interviews and a community forum. We also visited solar and wind farm sites and landowners’ properties (both hosts of new utilities and their neighbours). </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/3-key-measures-in-the-suite-of-new-reforms-to-deal-with-australias-energy-crisis-184554">3 key measures in the suite of new reforms to deal with Australia's energy crisis</a>
</strong>
</em>
</p>
<hr>
<figure>
<iframe src="https://player.vimeo.com/video/675661377" width="500" height="281" frameborder="0" webkitallowfullscreen="" mozallowfullscreen="" allowfullscreen=""></iframe>
</figure>
<h2>Positive, but unsure what lies ahead</h2>
<p>Overall, people were generally positive about the future development of renewable energy zones and the opportunities they presented. One resident told us:</p>
<blockquote>
<p>“There are hundreds of small rural communities throughout Australia that are struggling, and most won’t have an opportunity like this development. We want to be part of that movement, we want to grow and evolve in a rapidly changing world.” </p>
</blockquote>
<p>But some people were unsure about how the energy transition would affect their communities. This is unsurprising, given the lack of transition planning by the last federal government.</p>
<p>In places where multiple renewables projects have been built or planned, changes to land use and public assets were a concern to some. As one community member said: </p>
<blockquote>
<p>“Rural views are a big issue out here. And bush fires. There’s a question mark over the viability of agricultural land, particularly with the solar farms. And wear and tear on the roads and infrastructure.”</p>
</blockquote>
<p>State planning review processes will be tested as more closely located projects are proposed. This cumulative problem that needs to be addressed to ensure community support for renewable energy zones. </p>
<p>Local councils have fine-grained knowledge about their areas and should be key to these new planning processes. However, they have little co-ordinating power. As one council officer put it:</p>
<blockquote>
<p>“It’s really market forces deciding when [projects] get built, or don’t get built.”</p>
</blockquote>
<p>On transmission projects, Labor <a href="https://reneweconomy.com.au/not-fit-for-purpose-labor-vows-to-overhaul-regulatory-process-for-transmission-projects/">has said</a> it will require the Australian Energy Regulator to take a broader view of costs and benefits and increase community engagement on transmission decisions.</p>
<figure class="align-center ">
<img alt="turbines behind sheep in field" src="https://images.theconversation.com/files/468659/original/file-20220614-11-x3kfuv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/468659/original/file-20220614-11-x3kfuv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/468659/original/file-20220614-11-x3kfuv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/468659/original/file-20220614-11-x3kfuv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/468659/original/file-20220614-11-x3kfuv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/468659/original/file-20220614-11-x3kfuv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/468659/original/file-20220614-11-x3kfuv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Some residents feared reduced agricultural production.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<h2>How are benefits shared?</h2>
<p>Landowners are paid to host wind or solar projects and this can form a big part of a farm’s income. One host landholder told us:</p>
<blockquote>
<p>“The proposed solar development on our property is a massive positive. It allows us to drought proof our farm and continue as a viable business for the next generation.”</p>
</blockquote>
<p>However, renewables projects can cause conflicts with neighbours who may be affected by the development but are only eligible for much smaller payments – or sometimes none at all. </p>
<p>Areas designated as renewable energy zones have a much higher proportion of Aboriginal residents than the NSW average. To maximise socioeconomic benefits and protect heritage during the energy transition, Traditional Owners and other Aboriginal residents should be <a href="https://theconversation.com/how-can-aboriginal-communities-be-part-of-the-nsw-renewable-energy-transition-181171">better included</a> and consulted, in culturally appropriate ways, than they have been in the past.</p>
<p>Communities were generally positive about the broad economic benefits that flow from renewable energy projects during the construction phase. A local worker told us:</p>
<blockquote>
<p>“The workers would fill their vehicles [with fuel] in town before they left, or they’d get local caterers, or they’d sponsor local activities, that sort of thing.”</p>
</blockquote>
<p>But renewable energy projects have a lifetime of up to 30 years. Ensuring they create local benefits beyond the construction phase requires a broader industrial strategy and more carefully coordinated development to spread out the construction phases over time. </p>
<p>Some renewable energy companies run small grants schemes to contribute to local community organisations. We support proposals to formalise and combine some of these schemes. This would create a very significant pool of funds that could make substantial investments within a renewable energy zone.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/how-can-aboriginal-communities-be-part-of-the-nsw-renewable-energy-transition-181171">How can Aboriginal communities be part of the NSW renewable energy transition?</a>
</strong>
</em>
</p>
<hr>
<figure class="align-center ">
<img alt="man installs solar panels" src="https://images.theconversation.com/files/468671/original/file-20220614-20-p8kn3c.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/468671/original/file-20220614-20-p8kn3c.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/468671/original/file-20220614-20-p8kn3c.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/468671/original/file-20220614-20-p8kn3c.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/468671/original/file-20220614-20-p8kn3c.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/468671/original/file-20220614-20-p8kn3c.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/468671/original/file-20220614-20-p8kn3c.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Renewable energy zones have a much higher proportion of Aboriginal residents than the NSW average.</span>
<span class="attribution"><span class="source">Lucy Hughes Jones/AAP</span></span>
</figcaption>
</figure>
<h2>Planning for equitable change</h2>
<p>The pilot renewable energy zones embody a bold vision for Australia’s clean energy future. They should be used as a policy test-bed to ensure we get the transition right.</p>
<p>In particular, the pilots must ensure all residents can participate and share in the benefits, that socioeconomic development is sustainable and co-ordinated, and projects give back to communities over their full lifespan.</p>
<p>If we can nail all this at the pilot stage, renewable energy zones can bring significant benefits to other host communities and Australia as a whole.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/laggard-to-leader-labor-could-repair-australias-tattered-reputation-on-climate-change-if-it-gets-these-things-right-182860">Laggard to leader? Labor could repair Australia’s tattered reputation on climate change, if it gets these things right</a>
</strong>
</em>
</p>
<hr>
<img src="https://counter.theconversation.com/content/184743/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Rebecca Pearse receives funding from the Australia Research Council. </span></em></p><p class="fine-print"><em><span>Daniel J Cass is Energy Policy & Regulatory Lead at the Australia Institute and Senior Advisor to the Clean Energy Investor Group.
</span></em></p><p class="fine-print"><em><span>Linda Connor receives funding from Australian Research Council.</span></em></p><p class="fine-print"><em><span>Riikka Heikkinen receives receives funding from UTS for her PhD. She has student memberships in the Australian Institute of Energy, Smart Energy Council and RE-Alliance.</span></em></p>In the first major study of its kind, the authors travelled to where renewable energy is expanding in NSW to ask communities how they feel about the changes.Rebecca Pearse, Lecturer, Australian National UniversityDaniel J Cass, Research Affiliate, University of SydneyLinda Connor, Professor of Anthropology, University of SydneyRiikka Heikkinen, PhD Candidate, University of Technology SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1828492022-05-11T05:37:24Z2022-05-11T05:37:24ZElectricity prices are spiking, ten times as much as normal. Here are some educated guesses as to why<figure><img src="https://images.theconversation.com/files/462401/original/file-20220511-25-pn6746.png?ixlib=rb-1.1.0&rect=425%2C221%2C2892%2C1700&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Electricity prices in the short-term (“spot”) wholesale markets in Australia are surging again.</p>
<p>As I first drafted this, at 11.30pm on Tuesday, while electricity demands were not high, the prices quoted for each five-minute interval in Queensland, NSW, Victoria and South Australia were around <a href="https://www.aemo.com.au/energy-systems/electricity/national-electricity-market-nem/data-nem/data-dashboard-nem">A$250 per megawatt-hour</a>, roughly ten times what they would normally be. </p>
<p>So far this year, average spot prices have been about 50% higher than last year in Victoria, South Australia and Tasmania, about 80% higher in NSW, and 150% higher in Queensland. </p>
<p>If it keeps up (which is likely), retail electricity prices will be on the rise again. </p>
<p>That effect is likely to be big. In NSW and Queensland, it could mean increases as high as 50% for large customers and as high as 20% for households.</p>
<p>Why is it happening? At first glance, it’s hard to say. The minute-by-minute readout comes without explanations.</p>
<p>One reason would be that coal and gas prices are surging. Newcastle “spot” coal is trading at <a href="https://tradingeconomics.com/commodity/coal">five times</a> its price over the past three years.</p>
<h2>Gas and coal prices are spiking</h2>
<p>Queensland spot gas costs five times what it did before the invasion of Ukraine.</p>
<p>A second reason might be that electricity producers are making hay while the sun shines by withholding generation capacity.</p>
<p>Steven Percy and I examined the electricity price surges that followed the closure of Victoria’s Hazelwood coal-fired generator in 2017, and found that one firm <a href="https://www.vepc.org.au/_files/ugd/cb01c4_fb2fe6a7db544b97be4907a4cc13666a.pdf">withheld capacity from the market</a>, driving up prices. </p>
<p>Subsequently the government introduced so-called “<a href="https://www.afr.com/companies/energy/big-stick-energy-laws-unlikely-to-be-ever-used-20190917-p52s3a">big stick</a>” legislation that imposes <a href="https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/media-releases/government-taking-action-lower-power-prices">penalties</a> for manipulating prices, although it has yet to be used.</p>
<p>We do not yet know whether manipulation can explain some of what we see now. It will require detailed study, and such analyses are contested.</p>
<h2>The price of sunlight is not</h2>
<p>The best way to restrain price surges in the medium term is to increase the penetration of low-cost energy from the wind and sun, and to back it with storage. </p>
<p>South Australia shows what can be done. The Rann and Weatherill Labor governments, and then the Marshall Liberal government, have all pushed the switchover to renewables.</p>
<p>By 2021, more than two-thirds of SA’s electricity came from variable renewable generation, more than in any developed economy we know of. </p>
<p>For most days in 2021, there was no need for any other kind of generation between 10am and 5pm.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/labor-says-power-prices-are-going-up-the-coalition-says-not-whos-right-182234">Labor says power prices are going up, the Coalition says not. Who's right?</a>
</strong>
</em>
</p>
<hr>
<p>This has had a big impact on prices. From having long had the highest wholesale prices in the National Electricity Market, by 2021 SA had almost the lowest. </p>
<p>Conversely, Queensland, which has long had the least renewable generation, now has the highest prices. In the year to date, Queensland’s average wholesale <a href="https://www.aemo.com.au/energy-systems/electricity/national-electricity-market-nem/data-nem/data-dashboard-nem">price</a> has been twice SA’s.</p>
<h2>When inputs get cheap, prices fall</h2>
<p>The reason, backed by <a href="https://www.vepc.org.au/_files/ugd/cb01c4_1e9c944ea9524f38b3d1d392e08e94c0.pdf">econometric analysis</a> is that when a free resource (wind and sun) displaces an expensive resource (coal and gas), prices fall. </p>
<p>Each state government now accepts this and is rapidly moving to decarbonise its supply, which is leading to a new problem. The states that get there quickly are less keen on sharing their cheaper power than they used to be.</p>
<p>Why would SA want to strengthen its interconnection to NSW, only to have its electricity prices dragged up to those of NSW by trade along that wire?</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/20-years-on-the-national-electricity-market-is-on-the-way-out-and-its-ok-151018">20 years on, the national electricity market is on the way out, and it's OK</a>
</strong>
</em>
</p>
<hr>
<p>The newly elected SA government <a href="https://www.abc.net.au/news/2019-02-13/sa-nsw-electricity-interconnector-proposal-to-reduce-bills/10806376">opposed</a> the interconnector currently under construction while in opposition. From SA’s point of view, the current high prices in NSW lend weight to its position.</p>
<p>We have reached the end of the beginning of the decarbonisation of Australian electricity. With the fossils-vs-renewables argument now over other than on the fringes, the argument has moved to whether the National Electricity Market can <a href="https://theconversation.com/20-years-on-the-national-electricity-market-is-on-the-way-out-and-its-ok-151018">hold together</a> and the best way the Commonwealth can help states get as much sunlight, wind and batteries into their systems as soon as possible.</p><img src="https://counter.theconversation.com/content/182849/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Bruce Mountain does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>What’s pushing up coal and gas prices is pushing up electricity prices, but some states have better shields than others.Bruce Mountain, Director, Victoria Energy Policy Centre, Victoria UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1735912021-12-13T02:09:20Z2021-12-13T02:09:20ZThe end of coal is coming 3 times faster than expected. Governments must accept it and urgently support a ‘just transition’<figure><img src="https://images.theconversation.com/files/437076/original/file-20211213-19-1yekojl.jpg?ixlib=rb-1.1.0&rect=12%2C38%2C4254%2C2412&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Coal is likely to be completely gone from Victoria’s electricity system by 2032 with most other parts of Australia not far behind, a report from the Australian Energy Market Operator (AEMO) declared last week. </p>
<p>The report, called the <a href="https://aemo.com.au/-/media/files/major-publications/isp/2022/draft-2022-integrated-system-plan.pdf?la=en">2022 Integrated System Plan</a>, confirmed what many of us in energy policy have long known: the end of coal is coming, and the pace may take some industries and governments by surprise. </p>
<p>The <a href="https://aemo.com.au/en/energy-systems/major-publications/integrated-system-plan-isp/2022-integrated-system-plan-isp">Integrated System Plan</a> (ISP) is effectively the planning “blueprint” the market operator publishes to help industry and policy makers assess how Australia’s electricity system might evolve. It’s an incredibly important document for guiding where and when investment is needed to unlock new renewable resources to meet demand.</p>
<p>Given ISP’s prediction for the rapid closure of coal-fired power stations, it’s critical governments don’t stick their heads in the sand. Continuing to deny the impending end of coal-fired generation is simply not in the interest of coal workers and their communities, who urgently need support. </p>
<h2>What is AEMO predicting?</h2>
<p>The most important aspect of the ISP is that what used to be called the “step change” has now become the “central scenario”. For the first time, this central scenario is consistent with Australia’s commitment under the Paris Agreement and limiting global temperature rise to under 2°C. </p>
<p>The ISP is forecasting that huge volumes of coal will be retired in the next ten years, including all brown coal and two-thirds of black coal, and significant investments in new renewables and “firming technologies” (such as batteries, gas, and pumped hydro) will take their place. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/437079/original/file-20211213-13-1ax2nxg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/437079/original/file-20211213-13-1ax2nxg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/437079/original/file-20211213-13-1ax2nxg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/437079/original/file-20211213-13-1ax2nxg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/437079/original/file-20211213-13-1ax2nxg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/437079/original/file-20211213-13-1ax2nxg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/437079/original/file-20211213-13-1ax2nxg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/437079/original/file-20211213-13-1ax2nxg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">‘Firming’ technologies like pumped hydro are critical to ensure Australians have electricity when wind and solar aren’t available.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<p>Around 14 gigawatts (GW) of coal is now assumed to be exiting the National Electricity Market this decade – more than three times the amount of coal retirements the industry has announced. </p>
<p>Effectively, AEMO is saying (yet again) that the <a href="https://reneweconomy.com.au/agl-hit-by-huge-losses-as-it-scrambles-to-catch-up-with-switch-from-baseload/">incumbent industry is likely to be caught by surprise</a> by the speed of the transition.</p>
<p>It’s not just an explosion of renewables investment that AEMO predicts. Around 9GW of gas-fired generation and an extra 620GW hours of storage (provided by batteries or pumped hydro) will be required to provide backup generation capacity when solar and wind are unavailable. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/coal-plants-are-closing-faster-than-expected-governments-can-keep-the-exit-orderly-172150">Coal plants are closing faster than expected. Governments can keep the exit orderly</a>
</strong>
</em>
</p>
<hr>
<p>Electricity demand is expected to surge out to 2050 and will double to at least 350 terrawatt hours. This includes from electric vehicles uptake, converting natural gas heating and hot water to electric in homes, and electrifying many industrial processes such as low-emissions steel and aluminium. </p>
<p>All these developments will require a major overhaul of the grid. The ISP states around A$12.5 billion in transmission spending needs to occur to unlock $29 billion in investment benefits.</p>
<h2>Why is coal being left behind?</h2>
<p>There are two main drivers for this significant substitution of coal for new technologies. </p>
<p>First, the <a href="https://www.csiro.au/en/news/news-releases/2020/renewables-still-the-cheapest-new-build-power-in-australia">cost of these technologies</a> continues to fall rapidly and <a href="https://businessrenewables.org.au/state-of-the-market-report-2020/">consumers are voting with their feet</a>. Some of Australia’s largest and most iconic businesses are increasingly buying 100% of their energy from renewable resources, including Woolworths, BHP and Coles. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/solar-curtailment-is-emerging-as-a-new-challenge-to-overcome-as-australia-dashes-for-rooftop-solar-172152">Solar curtailment is emerging as a new challenge to overcome as Australia dashes for rooftop solar</a>
</strong>
</em>
</p>
<hr>
<p>Second, state governments have filled the void left by the lack of a nationally consistent energy and climate policy, and are now implementing ambitious policies to drive the uptake of renewable energy and firming. </p>
<p>The most ambitious of these policies is the <a href="https://www.energy.nsw.gov.au/government-and-regulation/electricity-infrastructure-roadmap">NSW government’s 12GW energy roadmap</a>, which effectively prepares for the retirement of ageing coal-fired power stations by facilitating investment in new capacity.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/437081/original/file-20211213-17-kk73zk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Tesla charging station" src="https://images.theconversation.com/files/437081/original/file-20211213-17-kk73zk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/437081/original/file-20211213-17-kk73zk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/437081/original/file-20211213-17-kk73zk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/437081/original/file-20211213-17-kk73zk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/437081/original/file-20211213-17-kk73zk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/437081/original/file-20211213-17-kk73zk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/437081/original/file-20211213-17-kk73zk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Electricity demand is expected to surge out to 2050.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<h2>So what should governments be doing?</h2>
<p>It is critical governments focus on a “just transition” to these new technologies, and provide support to <a href="https://www.actu.org.au/our-work/climate-change/the-need-for-a-just-transition">communities and workers</a> most impacted, such as those in the Hunter and Latrobe Valleys. </p>
<p><a href="https://journals.sagepub.com/doi/abs/10.1177/0269094214562171">Structural adjustment policies</a> such as job placements, relocation assistance, or financial support to transition local economies are vital to secure opportunities for these regions. Retraining ahead of closures will help workers transition to <a href="https://australiainstitute.org.au/wp-content/uploads/2020/12/P881-Getting-Off-Coal-WEB.pdf">new or related industries</a>. </p>
<p>Everyone who uses energy must be afforded access to the clean energy transition. At present, the biggest barrier to participating in the solar and battery revolution is owning your own home. </p>
<p>Governments have been absent from this important policy debate. Australian <a href="https://www.sciencedirect.com/science/article/pii/S0301421521005395">low-income and rental households should be prioritised</a> in any future policies that support adoption of solar and battery storage. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/437078/original/file-20211213-25-px87nl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Roofs with solar panels" src="https://images.theconversation.com/files/437078/original/file-20211213-25-px87nl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/437078/original/file-20211213-25-px87nl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=290&fit=crop&dpr=1 600w, https://images.theconversation.com/files/437078/original/file-20211213-25-px87nl.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=290&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/437078/original/file-20211213-25-px87nl.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=290&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/437078/original/file-20211213-25-px87nl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=364&fit=crop&dpr=1 754w, https://images.theconversation.com/files/437078/original/file-20211213-25-px87nl.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=364&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/437078/original/file-20211213-25-px87nl.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=364&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Rental homes have been left out of policy debates on renewables.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<p>Governments must also ensure the private sector (rather than consumers) wear the risk of poor investments. Governments are increasingly taking on very significant risk (on behalf of consumers) through underwriting renewable energy and firming investments of large multi-national energy businesses. </p>
<p>Some economists (including us) have been providing <a href="https://onlinelibrary.wiley.com/journal/14678489">alternative models</a> for governments to achieve the same objectives, but with greater focus on reducing risks to consumers. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/economists-back-carbon-price-say-benefits-of-net-zero-outweigh-costs-169939">Economists back carbon price, say benefits of net-zero outweigh costs</a>
</strong>
</em>
</p>
<hr>
<p>Given the surge in households and businesses voluntarily buying renewable energy, it’s important consumers know what they’re getting. The Clean Energy Regulator is doing some interesting work in this space by developing an emissions and renewable energy <a href="http://www.cleanenergyregulator.gov.au/Infohub/Markets/cert-report">transparency register</a> as part of the national greenhouse and energy reporting framework. </p>
<p>If governments really wanted to help, they could introduce a <a href="https://theconversation.com/economists-back-carbon-price-say-benefits-of-net-zero-outweigh-costs-169939">carbon price</a>. Such a policy is considered political poison, but a carbon price would result in us reaching this future in a much less costly and more orderly way.</p>
<h2>The end of the coal age</h2>
<p>The ISP is forecasting a better and cleaner future. Australia has great opportunities from moving beyond the coal age and into the age of efficient renewable energy, as we’re blessed with some of the best renewable resources on the planet</p>
<p>With global leaders increasingly focused on rapidly reducing emissions, we have a lot to gain through new industries, such as green hydrogen and mineral processing. Both <a href="https://theconversation.com/labors-2030-climate-target-betters-the-morrison-government-but-australia-must-go-much-further-much-faster-173066">major political parties</a> at the national level have targets that don’t really push beyond what AEMO now thinks is the status quo. </p>
<p>The stone age didn’t end because of a lack of stones. And the coal age is ending despite an abundance of it – whether governments believe it or not. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/labors-2030-climate-target-betters-the-morrison-government-but-australia-must-go-much-further-much-faster-173066">Labor’s 2030 climate target betters the Morrison government, but Australia must go much further, much faster</a>
</strong>
</em>
</p>
<hr>
<img src="https://counter.theconversation.com/content/173591/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Tim Nelson is an Associate Professor of Economics at the Centre for Energy Economics and Policy Research at Griffith Universtiy and the EGM of Energy Markets at Iberdrola Australia. </span></em></p><p class="fine-print"><em><span>Joel Gilmore is an Associate Professor at Griffith University and the GM, Energy Policy & Planning at Iberdrola Australia, that develops renewable projects and firming assets.</span></em></p>A new report predicts an incredibly rapid closure of coal-fired power stations. Continuing to deny this is simply not in the interest of coal workers and their communities.Tim Nelson, Associate Professor of Economics, Griffith UniversityJoel Gilmore, Associate Professor, Griffith UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1620852021-06-09T20:02:13Z2021-06-09T20:02:13ZCheck your mirrors: 3 things rooftop solar can teach us about Australia’s electric car rollout<figure><img src="https://images.theconversation.com/files/405282/original/file-20210609-3420-1pw4rk5.jpg?ixlib=rb-1.1.0&rect=0%2C559%2C4826%2C2791&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p><a href="https://www.nytimes.com/2021/03/31/business/biden-electric-vehicles-infrastructure.html">Governments</a> and <a href="https://www.reuters.com/article/volkswagen-strategy-idUSKBN27T24O">car manufacturers</a> are investing hundreds of billions of dollars on electric vehicles. But while the electric transport revolution is inevitable, the final destination remains unknown.</p>
<p>The electric vehicle transition is about more than just doing away with vehicles powered by fossil fuels. We must also ensure quality technology and infrastructure, anticipate the future and avoid unwanted outcomes, such as entrenching disadvantage.</p>
<p>In Australia, the electric vehicle rollout has been <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Electric_Vehicles/ElectricVehicles/Report/b03">slow</a>, and federal action <a href="https://www.abc.net.au/news/2021-02-05/government-plan-electric-vehicle-australia-what-you-need-to-know/13124828">limited</a>. But some state governments are working to electrify <a href="https://www.smh.com.au/national/nsw/sydney-aims-to-turn-entire-8000-bus-fleet-electric-by-2030-20201202-p56jui.html">bus fleets</a>, roll out <a href="https://www.abc.net.au/news/2021-05-24/fast-charging-stations-for-electric-vehicles-announced-in-sa/100160548">public charging networks</a> and trial <a href="https://www.agl.com.au/get-connected/electric-vehicles/smart-charging-trial">smart vehicle charging in homes</a>.</p>
<p>Australia’s world-leading rollout of rooftop solar power systems offers a guide to help navigate the transition. We’ve identified three key lessons on what’s gone well, and in hindsight, what could have been done differently.</p>
<figure class="align-center ">
<img alt="solar panels on roofs" src="https://images.theconversation.com/files/405284/original/file-20210609-15-1kg6ng9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/405284/original/file-20210609-15-1kg6ng9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=290&fit=crop&dpr=1 600w, https://images.theconversation.com/files/405284/original/file-20210609-15-1kg6ng9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=290&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/405284/original/file-20210609-15-1kg6ng9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=290&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/405284/original/file-20210609-15-1kg6ng9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=364&fit=crop&dpr=1 754w, https://images.theconversation.com/files/405284/original/file-20210609-15-1kg6ng9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=364&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/405284/original/file-20210609-15-1kg6ng9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=364&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Australia’s rooftop solar boom offers insights into the electric vehicle revolution.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<h2>1. Price isn’t everything</h2>
<p>Solar systems and electric vehicles are both substantial financial investments. But <a href="https://www.sciencedirect.com/science/article/pii/S2214629619307327">research</a> into rooftop solar has shown financial considerations are just one factor that guides purchasing decisions. Novelty, concerns about climate change and a desire for self-sufficiency are also significant – and electric vehicle <a href="https://www.sciencedirect.com/science/article/pii/S0966692318302928">research</a> is producing similar findings.</p>
<p>When considering the electric vehicle rollout, understanding these deeper motivators may help avoid a race to the bottom on price. </p>
<p>About one in four Australian homes has rooftop solar, with almost <a href="https://www.abc.net.au/news/2021-06-06/what-happens-to-solar-panels-after-their-useful-life-is-over/100193244">three million systems installed</a>. Solar companies have often sought to highlight the low price of rooftop systems over other considerations. This has created consumer demand for low-priced, lower-quality products – and led to potentially <a href="https://www.abc.net.au/news/2019-05-27/australias-obsession-with-cheap-solar-derailing-market-insiders/11139856">hundreds of thousands of substandard installations across Australia</a>.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/on-the-road-again-heres-how-the-states-can-accelerate-australias-sputtering-electric-vehicle-transition-158218">On the road again: here's how the states can accelerate Australia's sputtering electric vehicle transition</a>
</strong>
</em>
</p>
<hr>
<p>So what are the lessons here for the electric vehicle rollout? First, when planning public infrastructure where electric vehicles can be charged, construction costs should not be the only consideration. Factors such as <a href="https://bsgip.com/news-events/news/the-electric-vehicle-revolution-is-coming-so-lets-get-prepared/">night-time safety and disability access</a> should be prioritised. Shortcuts today will reinforce barriers for women and people with disabilities and create complex problems down the track. </p>
<p>Like rooftop solar, the <a href="https://www.nature.com/articles/s41560-018-0152-x">point of sale</a> of electric vehicles offers a unique opportunity to teach customers about the technology. Companies, however, can only afford to invest in customer education if they aren’t too stressed about margins. </p>
<p><a href="https://arena.gov.au/blog/australian-smart-charging-trial-prepares-for-ev-growth/">“Smart” charging</a> is one measure being explored to ensure the electricity network can handle future growth in electric vehicle uptake. Smart chargers can be remotely monitored and controlled to minimise their impact on the grid. </p>
<p>The point of sale is a pivotal moment to tell new owners of electric vehicles that their charging may at times be managed in this way.</p>
<figure class="align-center ">
<img alt="EVs on charge" src="https://images.theconversation.com/files/405285/original/file-20210609-23-1awvs3x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/405285/original/file-20210609-23-1awvs3x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=436&fit=crop&dpr=1 600w, https://images.theconversation.com/files/405285/original/file-20210609-23-1awvs3x.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=436&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/405285/original/file-20210609-23-1awvs3x.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=436&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/405285/original/file-20210609-23-1awvs3x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=548&fit=crop&dpr=1 754w, https://images.theconversation.com/files/405285/original/file-20210609-23-1awvs3x.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=548&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/405285/original/file-20210609-23-1awvs3x.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=548&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Electric vehicle charging infrastructure should be safe and accessible.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<h2>2. Plan ahead</h2>
<p>The uptake of rooftop solar in Australia has been a raging success. In fact, rooftop solar is now <a href="https://aemo.com.au/-/media/files/major-publications/ris/2020/webinar_ris_dpv.pdf?la=en">the largest generator in the national power system</a>.</p>
<p>This raises issues, such as how rooftop solar systems will respond to a major disturbance, such as the failure of a <a href="https://www.pv-magazine-australia.com/2021/04/01/researchers-target-rooftop-solar-in-hunt-for-grid-security/">transmission line</a>. A large amount of solar power feeding into the grid can also <a href="https://renew.org.au/renew-magazine/solar-batteries/solar-and-high-grid-voltage/">challenge</a> electricity network infrastructure.</p>
<p>In response, electricity networks have implemented changes such as <a href="https://www.abc.net.au/news/2021-03-17/solar-panels-switched-off-in-sa-to-stabilise-grid/13256572">limiting</a> solar exports and therefore, returns to solar system owners, and <a href="https://www.abc.net.au/news/2021-03-25/solar-panel-owners-angry-at-charges-for-exporting-power-to-grid/100027514">charging fees</a> for exporting solar. </p>
<p>Such retrospective changes have been unpopular with solar owners. So to maintain reliable electricity supplies, and avoid angering consumers, it’s vital to plan where and when electric vehicles are charged.</p>
<p>If every vehicle in Australia was electric, this would add about <a href="https://theconversation.com/owners-of-electric-vehicles-to-be-paid-to-plug-into-the-grid-to-help-avoid-blackouts-132519">a quarter to national power demand</a>. The rise in demand would be greatest near bus and logistics depots and ultra-fast highway chargers.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/owners-of-electric-vehicles-to-be-paid-to-plug-into-the-grid-to-help-avoid-blackouts-132519">Owners of electric vehicles to be paid to plug into the grid to help avoid blackouts</a>
</strong>
</em>
</p>
<hr>
<p>Timing is key to maximising the use of a network connection without overloading it. For example, if everyone charged their vehicle in the evening after they get home from work, as this would put further pressure on electricity supplies at this peak time.</p>
<p>Governments and electricity providers should encourage electric vehicle charging during the day, when demand is lower. This might mean, for example, providing vehicle charging facilities at workplaces and in public areas.</p>
<p>Until Australia’s power grid transitions to 100% renewables, the use of solar energy should be strongly encouraged. This would ensure the vehicles were charged from a clean, cheap energy source and would help manage the challenges of abundant solar.</p>
<p>The question of <a href="https://www.drive.com.au/news/victoria-passes-road-user-tax-for-electric-vehicle-owners-industry-reacts/">road user charges</a> for electric vehicles drivers is another example where it’s best to avoid retrospective changes. Such charges are <a href="https://theconversation.com/road-user-charging-belongs-on-the-political-agenda-as-the-best-answer-for-congestion-management-65027">necessary in the long run</a> and best introduced from the outset.</p>
<figure class="align-center ">
<img alt="woman's arm holds EV charger on car" src="https://images.theconversation.com/files/405286/original/file-20210609-15-1k75ldb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/405286/original/file-20210609-15-1k75ldb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/405286/original/file-20210609-15-1k75ldb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/405286/original/file-20210609-15-1k75ldb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/405286/original/file-20210609-15-1k75ldb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/405286/original/file-20210609-15-1k75ldb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/405286/original/file-20210609-15-1k75ldb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Vehicle charging during the day, when power demand is lowest, should be encouraged.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<h2>3. Coordination is key</h2>
<p>Electric vehicle policy spans many government portfolios: transport, infrastructure, energy, planning, environment and climate change. Nationally, and from state to state, different ministers are in charge. </p>
<p>This makes coordination difficult, and creates the risk of policies undermining each other. For example, one policy might encourage the charging of electric vehicles from rooftop solar, to reduce carbon emissions. But because solar energy is so cheap, this might encourage more <a href="https://theconversation.com/think-taxing-electric-vehicle-use-is-a-backward-step-heres-why-its-an-important-policy-advance-150644">private vehicle use</a>, which worsens road congestion.</p>
<p>So policies to encourage electric vehicle uptake should not come at the cost of creating <a href="https://theconversation.com/dont-forget-the-need-for-zero-emission-buses-in-the-push-for-electric-cars-160933">more attractive and efficient</a> public transport networks. </p>
<p>And new technologies can <a href="https://theconversation.com/climate-policy-that-relies-on-a-shift-to-electric-cars-risks-entrenching-existing-inequities-160856">entrench societal disadvantage</a>. For example, the rooftop solar rollout often excluded people who <a href="https://www.abc.net.au/religion/solar-justice-who-should-pay-for-the-grid/13376586">could not afford to buy the systems</a>. Without policies to address this, the electric vehicle transition could lead to similar outcomes.</p>
<figure class="align-center ">
<img alt="traffic queues in Sydney" src="https://images.theconversation.com/files/405287/original/file-20210609-7455-1uh5vni.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/405287/original/file-20210609-7455-1uh5vni.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/405287/original/file-20210609-7455-1uh5vni.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/405287/original/file-20210609-7455-1uh5vni.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/405287/original/file-20210609-7455-1uh5vni.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/405287/original/file-20210609-7455-1uh5vni.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/405287/original/file-20210609-7455-1uh5vni.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Encouraging electric vehicle use could worsen road congestion, if not well managed.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<h2>Lessons in the rear-view mirror</h2>
<p>As Australia’s experience with rooftop solar has shown, successful technology transitions must be carefully planned and attentively steered.</p>
<p>In the case of electric vehicles, this will ensure the benefits to owners, society and the environment are fully realised. It will also ensure a smooth-as-possible transition, the gains from which all Australians can share.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-us-jumps-on-board-the-electric-vehicle-revolution-leaving-australia-in-the-dust-154566">The US jumps on board the electric vehicle revolution, leaving Australia in the dust</a>
</strong>
</em>
</p>
<hr>
<img src="https://counter.theconversation.com/content/162085/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Bjorn Sturmberg has received funding from the Australian Renewable Energy Agency for electric vehicle projects.</span></em></p><p class="fine-print"><em><span>Mejbaul Haque has received funding from the Australian Renewable Energy Agency for electric vehicle projects.</span></em></p><p class="fine-print"><em><span>Kathryn Lucas-Healey has received funding from the Australian Renewable Energy Agency for electric vehicle projects, and is on unpaid leave from working at Chargefox. </span></em></p><p class="fine-print"><em><span>Laura Jones has received funding from the Australian Renewable Energy Agency for electric vehicle projects.</span></em></p>The electric vehicle transition is about more than just scrapping petrol cars. We must also ensure quality technology, anticipate the future and make sure no-one gets left behind.Bjorn Sturmberg, Research Leader, Battery Storage & Grid Integration Program, Australian National UniversityDr Md Mejbaul Haque, Research Fellow, Battery Energy Storage and Grid Integration Program, Research School of Engineering, Australian National UniversityKathryn Lucas-Healey, Research Fellow, Australian National UniversityLaura Jones, Senior Analyst - Economics and Business models, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1585292021-04-11T19:51:11Z2021-04-11T19:51:11ZMore coal-fired power or 100% renewables? For the next few decades, both paths are wrong<figure><img src="https://images.theconversation.com/files/394184/original/file-20210409-21-odilfe.jpg?ixlib=rb-1.1.0&rect=37%2C12%2C4172%2C2821&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>The big question facing Australia’s National Electricity Market is how to achieve net-zero emissions by 2050 without disrupted energy supplies or skyrocketing prices.</p>
<p>Some say coal-fired power will be needed. Others say 100% renewable electricity is the way to go. But our <a href="https://grattan.edu.au/report/go-for-net-zero/">new report</a> released today argues neither path is wise in the medium term.</p>
<p>It shows renewable energy – particularly wind and solar – can get us most of the way to net-zero. But as the renewable share approaches 100%, maintaining reliable supply will become very expensive.</p>
<p>The best approach for now is to target net-zero emissions. This will involve retaining a small proportion of fossil-fuel generation – namely gas – in the electricity mix over the next couple of decades. But it does not mean extending the life of existing coal-fired power stations, or building new ones.</p>
<figure class="align-center ">
<img alt="street with power lines" src="https://images.theconversation.com/files/394185/original/file-20210409-15-1reiwiy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/394185/original/file-20210409-15-1reiwiy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/394185/original/file-20210409-15-1reiwiy.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/394185/original/file-20210409-15-1reiwiy.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/394185/original/file-20210409-15-1reiwiy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/394185/original/file-20210409-15-1reiwiy.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/394185/original/file-20210409-15-1reiwiy.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Australia’s electricity system must decarbonise without affecting reliability or affordability.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<h2>A fork in the road</h2>
<p>All state and territory governments <a href="https://www.climatecouncil.org.au/resources/nt-puts-australia-on-track-for-net-zero-climate-target/">have committed</a> to achieving net-zero carbon emissions by 2050. Prime Minister Scott Morrison says achieving that goal is <a href="https://theconversation.com/scott-morrison-has-embraced-net-zero-emissions-now-its-time-to-walk-the-talk-154478">his preference</a>, too.</p>
<p>That means the electricity sector needs to reduce the amount of greenhouse gases it releases to the atmosphere. </p>
<p>Most electricity customers in Australia, except those in Western Australia and the Northern Territory, are supplied by the National Electricity Market (<a href="https://aemo.com.au/en/energy-systems/electricity/national-electricity-market-nem/about-the-national-electricity-market-nem">NEM</a>). It comprises electricity generators, transmission lines and other infrastructure to deliver electricity to customers, and a wholesale market where electricity is bought and sold. </p>
<p>The market’s coal-fired power stations are ageing. As the below graph shows, virtually all are scheduled to be retired in the next three decades.</p>
<p>Renewable energy is now the <a href="https://www.csiro.au/en/news/news-releases/2020/renewables-still-the-cheapest-new-build-power-in-australia">cheapest source</a> of electricity, but it’s an intermittent form of supply – generated only when the wind is blowing or the sun is shining.</p>
<p>The question now is what technology mix – including fossil fuels, renewable energy sources and energy storage systems – the NEM should adopt.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/393792/original/file-20210407-23-1lo17jd.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Graph of Australia's coal-fired power station closure dates." src="https://images.theconversation.com/files/393792/original/file-20210407-23-1lo17jd.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/393792/original/file-20210407-23-1lo17jd.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/393792/original/file-20210407-23-1lo17jd.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/393792/original/file-20210407-23-1lo17jd.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/393792/original/file-20210407-23-1lo17jd.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/393792/original/file-20210407-23-1lo17jd.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/393792/original/file-20210407-23-1lo17jd.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
</figcaption>
</figure>
<h2>‘Good news for Australia’</h2>
<p>The Grattan Institute developed a sophisticated economic model of the NEM to answer this question. We investigated the emissions, reliability and affordability implications of different future technology mixes. </p>
<p>We compared three scenarios:</p>
<ol>
<li><p>the NEM continues to rely on coal, with new coal-fired power stations replacing old ones as they are retired</p></li>
<li><p>70% of the NEM’s electricity comes from renewables, with two-thirds less coal capacity than today</p></li>
<li><p>90% or more electricity comes from renewables, with no coal-fired generation at all.</p></li>
</ol>
<p>The model tested each technology mix against nine years of hourly weather and electricity demand data across the NEM, adjusted for projected changes in future demand. It then computed the cost of supplying electricity with each mix. </p>
<p>The results are good news for Australia. A 70% renewable system looks to be about as affordable as maintaining a coal-based system over the long run, but with 70 million fewer tonnes of emissions each year. </p>
<p>The cost of doing this is extremely low – about A$7 for each tonne of emissions abated. This is less than the A$16/t the federal government pays for emissions reduction now via its <a href="http://www.cleanenergyregulator.gov.au/ERF/Pages/Auctions%20results/September%202020/Auction-September-2020.aspx">Climate Solutions Fund</a>.</p>
<p>Moving from 70% to 90% renewables would trim another 35 million tonnes of greenhouse gas emissions for less than A$40/t. This is still low-cost abatement. By comparison, the European Union’s carbon price rose to about <a href="https://www.bloomberg.com/news/articles/2021-03-10/eu-carbon-price-hits-a-record-41-euros-as-rally-speeds-up">A$67/t in March 2021</a>, while Canada plans to raise its carbon tax to about <a href="https://www.nortonrosefulbright.com/en/knowledge/publications/d58ef644/canada-to-increase-carbon-taxes-by-467">A$181/t by 2030</a>.</p>
<figure class="align-center ">
<img alt="coal plant at night" src="https://images.theconversation.com/files/394191/original/file-20210409-15-1b0fxem.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/394191/original/file-20210409-15-1b0fxem.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/394191/original/file-20210409-15-1b0fxem.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/394191/original/file-20210409-15-1b0fxem.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/394191/original/file-20210409-15-1b0fxem.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/394191/original/file-20210409-15-1b0fxem.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/394191/original/file-20210409-15-1b0fxem.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">One scenario analysed a future with no coal.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<h2>Let’s get connected</h2>
<p>Transmission infrastructure is key to decarbonising the electricity sector. </p>
<p>High-voltage transmission lines carry electricity over the long distances from where it’s produced to where it’s needed. They also connect the states of the NEM, enabling electricity to be traded between regions. The below graph shows the transmission network today.</p>
<p>To get to higher renewable shares, more transmission infrastructure is needed, for two reasons:</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/what-is-the-electricity-transmission-system-and-why-does-it-need-fixing-147903">What is the electricity transmission system, and why does it need fixing?</a>
</strong>
</em>
</p>
<hr>
<p>First, many sunny and windy places are located at the edges of the NEM states. If wind and solar plants were built there, transmission would be needed to connect them to the network. </p>
<p>Second, more transmission between NEM states would allow each state to export renewable energy when it has too much, and import when it needs more.</p>
<p>There are costs and benefits to weigh up here. Extra transmission infrastructure requires significant investment. However it would mean less generation infrastructure is needed in each state, reducing overall costs. </p>
<p>Our report shows at 90% renewables, the benefits of a more-interconnected NEM outweigh the costs to the tune of A$800 million or more each year.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/393793/original/file-20210407-21-mqz336.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/393793/original/file-20210407-21-mqz336.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/393793/original/file-20210407-21-mqz336.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/393793/original/file-20210407-21-mqz336.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/393793/original/file-20210407-21-mqz336.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/393793/original/file-20210407-21-mqz336.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/393793/original/file-20210407-21-mqz336.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption"></span>
</figcaption>
</figure>
<h2>Net-zero is more affordable than 100% renewables</h2>
<p>The best information available today indicates climbing from 90% to 100% renewables will be expensive. This is mainly due to the challenge of balancing demand and supply during rare, sustained periods of low wind, low solar and high demand. </p>
<figure class="align-right ">
<img alt="gas flare" src="https://images.theconversation.com/files/394189/original/file-20210409-19-1rfljlc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/394189/original/file-20210409-19-1rfljlc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=600&fit=crop&dpr=1 600w, https://images.theconversation.com/files/394189/original/file-20210409-19-1rfljlc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=600&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/394189/original/file-20210409-19-1rfljlc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=600&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/394189/original/file-20210409-19-1rfljlc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=754&fit=crop&dpr=1 754w, https://images.theconversation.com/files/394189/original/file-20210409-19-1rfljlc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=754&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/394189/original/file-20210409-19-1rfljlc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=754&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Gas peaking plants will likely be an important, but not expanded, part of Australia’s energy transition.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<p>Gas is an ideal backstop for this challenge. <a href="https://www.energycouncil.com.au/analysis/gas-supply-and-gas-generation-put-on-centre-stage/">Gas-fired generators</a> are cheap to build but costly to run. These economics suit this problem nicely because they will be needed only infrequently. </p>
<p>Alternatives look more expensive. <a href="https://www.industry.gov.au/data-and-publications/australias-national-hydrogen-strategy">Hydrogen</a> could very well replace gas as a backstop, but only if the cost of producing and storing it falls significantly. Carbon capture and storage (<a href="https://www.industry.gov.au/funding-and-incentives/low-emissions-technologies-for-fossil-fuels/carbon-capture-storage-flagships">CCS</a>) can work only in certain locations, and is much less economic if used infrequently. Batteries and even pumped hydro will struggle over <a href="https://reneweconomy.com.au/energy-storage-its-not-just-size-that-counts-but-how-long-it-lasts-34857/">rare, multi-day challenges</a>.</p>
<p>Of course, gas is <a href="https://theconversation.com/a-single-mega-project-exposes-the-morrison-governments-gas-plan-as-staggering-folly-133435">not a zero-emissions</a> solution. To reach net zero efficiently, the lowest-cost option in the medium term is most likely to rely on 90% or more renewables and offset the remaining pollution with <a href="https://www.iea.org/commentaries/going-carbon-negative-what-are-the-technology-options">negative-emissions technologies</a>. </p>
<p>So it looks likely gas will play an important but not expanded role over the next few decades. And if zero-emissions alternatives fall in cost faster than current projections suggest, the role for gas will shrink faster.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/australia-is-at-a-crossroads-in-the-global-hydrogen-race-and-one-path-looks-risky-157864">Australia is at a crossroads in the global hydrogen race – and one path looks risky</a>
</strong>
</em>
</p>
<hr>
<figure class="align-center ">
<img alt="Solar farm" src="https://images.theconversation.com/files/394190/original/file-20210409-13-tl43jr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/394190/original/file-20210409-13-tl43jr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=397&fit=crop&dpr=1 600w, https://images.theconversation.com/files/394190/original/file-20210409-13-tl43jr.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=397&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/394190/original/file-20210409-13-tl43jr.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=397&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/394190/original/file-20210409-13-tl43jr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=499&fit=crop&dpr=1 754w, https://images.theconversation.com/files/394190/original/file-20210409-13-tl43jr.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=499&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/394190/original/file-20210409-13-tl43jr.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=499&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">If the cost of zero-emissions electricity generation falls more quickly than projected, gas will be phased out sooner.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<h2>The way forward</h2>
<p>Three recommendations flow from these conclusions. </p>
<p>First, governments should have confidence in planning for a net-zero emissions future for the NEM by the 2040s. We’ve shown emissions <em>can</em> be reduced while maintaining reliable and affordable electricity supply. </p>
<p>Governments should not try to extend the life of existing coal-fired power stations, let alone <a href="https://www.sbs.com.au/news/nationals-mps-ignite-fresh-climate-row-with-push-for-more-investment-in-coal">subsidise new ones</a>.</p>
<p>Second, net-zero emissions – not 100% renewables – is the appropriate target to be setting today. </p>
<p>Third, more transmissison infrastructure will help achieve higher renewable shares at lower cost. State governments should work together to resolve <a href="https://www.energycouncil.com.au/analysis/which-state-pays-for-interconnectors/">disputes</a> about who should pay for interstate transmission upgrades. </p>
<p>And the states should not try to go it alone. Australia’s great energy transition will be most affordable if the states stick together.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/against-the-odds-south-australia-is-a-renewable-energy-powerhouse-how-on-earth-did-they-do-it-153789">Against the odds, South Australia is a renewable energy powerhouse. How on Earth did they do it?</a>
</strong>
</em>
</p>
<hr>
<img src="https://counter.theconversation.com/content/158529/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The Grattan Institute began with contributions to its endowment of $15 million from each of the Federal and Victorian Governments, $4 million from BHP Billiton, and $1 million from NAB. In order to safeguard its independence, Grattan Institute’s board controls this endowment. The funds are invested and contribute to funding Grattan Institute's activities. Grattan Institute also receives funding from corporates, foundations, and individuals to support its general activities as disclosed on its website.</span></em></p>Electricity emissions can be cut to net-zero while keeping the lights on and prices down. But achieving that quickly means keeping gas around, for now.James Ha, Associate, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1580552021-03-30T18:53:21Z2021-03-30T18:53:21ZNow they want to charge households for exporting solar electricity to the grid — it’ll send the system backwards<figure><img src="https://images.theconversation.com/files/392507/original/file-20210330-17-zm5x3.jpg?ixlib=rb-1.1.0&rect=180%2C238%2C2247%2C1394&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source"> zstock/Shutterstock</span></span></figcaption></figure><p>It’s come to this. The Australian Energy Markets Commission has produced a <a href="https://www.aemc.gov.au/news-centre/media-releases/new-plan-make-room-grid-more-home-solar-and-batteries">draft decision</a> that will make households and small business with solar panels pay to inject their surplus production into the grid. </p>
<p>It suggests an annual charge of about <a href="https://www.aemc.gov.au/sites/default/files/2021-03/Draft%20Determination%20-%20ERC0311%20and%20RRC0039%20-%20Access%20Pricing%20and%20Incentive%20arrangements%20for%20DER.pdf">A$100</a> per solar-connected household. </p>
<p>The arrangement will only apply to small producers — almost all of whom are solar-enabled households. It won’t apply to large producers who will continue to export to the shared grid without charge. </p>
<p>The Victoria Energy Policy Centre’s analysis of 7,212 household electricity bills finds the typical Victorian household with solar panels exports about <a href="https://243b2ed8-6648-49fe-80f0-f281c11c3917.filesusr.com/ugd/cb01c4_2155920402f64e74b0f8d70ffd1bd999.pdf">2,200</a> kilowatt hours per year. This is about the amount of electricity an electric vehicle needs to cover about 12,000 kilometres, which is about the average annual mileage in Australia. </p>
<p>On the basis of feed-in rates that will soon apply in Victoria, we estimate that the typical solar system will provide the typical Victorian household with feed-in income of around $120 per year. </p>
<p>The proposed export charge of $100 will therefore almost totally offset the feed-in income, meaning households with rooftop solar would effectively get nothing for the surplus power they deliver to the grid.</p>
<h2>Net income from solar would fall to near-zero</h2>
<p>However the proposed annual fee of $100 from the 2.7 million households with solar panels will raise $270m per year. </p>
<p>The Commission says it wants this sent back to all households in the form of lower charges. Before accounting for other factors that this change will effect, our calculations suggest this will cut the typical bill for households without solar by about 1.7%. After accounting for the Commission’s sun tax the typical bill for households with solar will increase by about 7%.</p>
<p>When the <a href="https://www.abc.net.au/news/2021-03-25/australians-with-rooftop-solar-charged-export-electricity-grid/100026336">ABC</a> and <a href="https://www.smh.com.au/politics/federal/home-battery-incentives-allowed-to-stop-solar-power-traffic-jams-20210324-p57dif.html">others</a> reported the decision, it drew irate responses.</p>
<h2>What’s the rationale?</h2>
<p>The Commission argues that small consumers should pay to use the grid whether they are injecting electricity into it or withdrawing electricity from it, and that if charges only applied to withdrawals then those customers that injected would be subsidised by those that withdrew.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/392474/original/file-20210330-19-7mtuvc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/392474/original/file-20210330-19-7mtuvc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/392474/original/file-20210330-19-7mtuvc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=970&fit=crop&dpr=1 600w, https://images.theconversation.com/files/392474/original/file-20210330-19-7mtuvc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=970&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/392474/original/file-20210330-19-7mtuvc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=970&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/392474/original/file-20210330-19-7mtuvc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1219&fit=crop&dpr=1 754w, https://images.theconversation.com/files/392474/original/file-20210330-19-7mtuvc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1219&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/392474/original/file-20210330-19-7mtuvc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1219&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Households that inject also withdraw.</span>
</figcaption>
</figure>
<p>At first sight, it seems reasonable. On closer inspection, it isn’t. </p>
<p>This is because the households that inject electricity also withdraw electricity and injections are typically much smaller than withdrawals and do not meaningfully increase network costs. </p>
<p>Residential connections are usually limited to at least 40 amps which, at 250 volts, allows a flow at the rate of 10 kilowatts. </p>
<p>Only a tiny number of rooftop solar systems produce this much – the median system is less than half that size. </p>
<p>This means networks can easily accommodate residential injections without incurring significant expenditure apart from a few adjustments such as balancing the voltage across phases of a circuit or adjusting transformers. </p>
<h2>The costs imposed by solar households are small</h2>
<p>This is seldom more than routine work and it shows up as small claims approved by the regulator as “distributed energy integration”. </p>
<p>For Powercor, the Victorian distributor that has the highest rooftop solar penetration, the regulator and Powercor has agreed distributed energy integration expenditure for the next five years that will add just <a href="https://www.aer.gov.au/system/files/AER%20-%20Draft%20decision%20-%20Powercor%20distribution%20determination%202021-26%20-%20Overview%20-%20September%202020.pdf">0.1%</a> to its allowed revenues. </p>
<p>The proposed injection charge seems to reflect the Commission’s view that injectors should pay for sunk as well as incurred costs. Standard welfare economics treats sunk costs like it treats taxes. It says the best way to recover them is to raise them from the activities that the tax will <a href="https://theconversation.com/vital-signs-stamp-duty-is-an-economic-drag-heres-how-to-move-to-a-better-system-141777">change the least</a>.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/20-years-on-the-national-electricity-market-is-on-the-way-out-and-its-ok-151018">20 years on, the national electricity market is on the way out, and it's OK</a>
</strong>
</em>
</p>
<hr>
<p>Households have little choice but to withdraw electricity from the grid (when the sun’s not shining or their battery is running low - if they have one), but they can easily choose not to install solar. </p>
<p>Since the Commission’s proposal will reduce typical injection income to almost zero, it is very likely to slow the uptake of solar.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/392482/original/file-20210330-21-17tutnm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/392482/original/file-20210330-21-17tutnm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/392482/original/file-20210330-21-17tutnm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=351&fit=crop&dpr=1 600w, https://images.theconversation.com/files/392482/original/file-20210330-21-17tutnm.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=351&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/392482/original/file-20210330-21-17tutnm.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=351&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/392482/original/file-20210330-21-17tutnm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=441&fit=crop&dpr=1 754w, https://images.theconversation.com/files/392482/original/file-20210330-21-17tutnm.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=441&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/392482/original/file-20210330-21-17tutnm.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=441&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="source" href="https://www.aemc.gov.au/sites/default/files/2021-03/ERC0309%20-%20draft%20-%20infographic.pdf">How the Australian Energy Market Commission describes its proposal.</a></span>
</figcaption>
</figure>
<p>This will destroy welfare. Distributed solar provides benefits for all consumers since it is close to where it is needed (and so reduces the need for transmission) and it displaces more expensive fossil fuel generation and so reduces wholesale prices. </p>
<p>The 2.7 million households that already solar have another reason to be upset. It will reduce the return on the investments that governments encouraged them to make. </p>
<p>The Commission might feel that the consumer backlash is not its problem: it has done its job in recommending an economically sensible charge. But it is wrong: it has proposed a distortionary and welfare-destroying “<a href="https://www.solarcitizens.org.au/stop_the_sun_tax">sun tax</a>”.</p>
<h2>The states are likely to block it</h2>
<p>The Commission reports to the states and Commonwealth. There must surely be little chance the states will accept the recommendation. If they do, to avoid confronting an administrative behemoth, they are likely to water down the recommendation to the point where all that is left is more pointless bureaucracy.</p>
<p>But even this relatively benign outcome would be a mistake. It would undermine consumers’ and investors’ already fragile confidence in national energy policy.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/electricity-is-now-a-jigsaw-coal-is-unable-to-provide-the-missing-pieces-157139">Electricity is now a jigsaw. Coal is unable to provide the missing pieces</a>
</strong>
</em>
</p>
<hr>
<p>In a <a href="https://theconversation.com/want-electricity-reform-start-by-giving-power-back-to-the-states-72965">previous article</a> I argued that the states should take back control of electricity from organisations such as the Australian Energy Markets Commission.</p>
<p>Victoria and then New South Wales passed laws last year to begin to do that and are rapidly developing their <a href="https://www.energy.vic.gov.au/renewable-energy/renewable-energy-zones">own arrangements</a>.</p>
<p>The proposed sun tax is likely to encourage the states to pull away yet further.</p><img src="https://counter.theconversation.com/content/158055/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Bruce Mountain does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Standard economic theory suggests solar exports shouldn’t be taxed at all.Bruce Mountain, Director, Victoria Energy Policy Centre, Victoria UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1510182020-12-09T19:10:56Z2020-12-09T19:10:56Z20 years on, the national electricity market is on the way out, and it’s OK<figure><img src="https://images.theconversation.com/files/373772/original/file-20201209-13-1t8g5uu.jpg?ixlib=rb-1.1.0&rect=0%2C208%2C2020%2C952&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.teslarati.com/tesla-megapack-battery-farm-groundbreaking-victoria/">NEOEN Energy</a></span></figcaption></figure><p>It has been more than 20 years in the making, but there is now a new order in Australia’s grandest (and most problematic) example of cooperative federalism: the <a href="https://www.energy.gov.au/government-priorities/energy-markets/national-electricity-market-nem">National Electricity Market</a>. </p>
<p>Not completely national (it excludes Western Australia and the Northern Territory), it links most towns east of Port Lincoln and south of Port Douglas so that, in theory, electricity produced near any of them can be used anywhere else.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/373715/original/file-20201208-23-op3sv7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/373715/original/file-20201208-23-op3sv7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/373715/original/file-20201208-23-op3sv7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=778&fit=crop&dpr=1 600w, https://images.theconversation.com/files/373715/original/file-20201208-23-op3sv7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=778&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/373715/original/file-20201208-23-op3sv7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=778&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/373715/original/file-20201208-23-op3sv7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=977&fit=crop&dpr=1 754w, https://images.theconversation.com/files/373715/original/file-20201208-23-op3sv7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=977&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/373715/original/file-20201208-23-op3sv7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=977&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="source" href="https://www.aemc.gov.au/energy-system/electricity/electricity-system/energy-system">Australian Energy Market Commission</a></span>
</figcaption>
</figure>
<p>This year first Victoria, and now NSW, have brought the development of their transmission and generation systems back under their own control. </p>
<p>Victoria set the ball rolling earlier this year with legislation to take back the power to plan and deliver new transmission. </p>
<p>In November in its first major use of the new laws it announced the procurement of a 300 megawatt battery near Geelong. Just three years ago a battery this size would have been three times bigger than the biggest in the world. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/australias-states-have-been-forced-to-go-it-alone-on-renewable-energy-but-its-a-risky-strategy-151086">Australia's states have been forced to go it alone on renewable energy, but it's a risky strategy</a>
</strong>
</em>
</p>
<hr>
<p>NSW followed with legislation in November to create new authorities to plan and contract for the development of what it expects to be A$32 billion worth of new transmission, generation and storage facilities over the next 10 years. </p>
<p>In both states the legislation obtained widespread support in parliament. </p>
<h2>Why they’re bringing electricity home</h2>
<p>The reasons are political and economic.</p>
<p>Politically, reductions in the costs of wind and solar generation has meant decarbonisation is increasingly seen as a way to cut electricity prices. </p>
<p>But in both states a small number of privately-owned coal generators dominate production. Their owners have little interest in cutting the value of their plants by bringing on (renewable) replacements. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-national-electricity-market-has-served-its-purpose-time-to-move-on-80973">The national electricity market has served its purpose, time to move on</a>
</strong>
</em>
</p>
<hr>
<p>In addition, notwithstanding the privatisation of generation and the creation of the National Electricity Market, voters have continued to look to state ministers to decarbonise the grid, keep the lights on and get prices down.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/373765/original/file-20201209-21-1dnfeib.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/373765/original/file-20201209-21-1dnfeib.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/373765/original/file-20201209-21-1dnfeib.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=971&fit=crop&dpr=1 600w, https://images.theconversation.com/files/373765/original/file-20201209-21-1dnfeib.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=971&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/373765/original/file-20201209-21-1dnfeib.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=971&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/373765/original/file-20201209-21-1dnfeib.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1220&fit=crop&dpr=1 754w, https://images.theconversation.com/files/373765/original/file-20201209-21-1dnfeib.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1220&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/373765/original/file-20201209-21-1dnfeib.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1220&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Generators no longer need access to mines.</span>
</figcaption>
</figure>
<p>The arrangements that governed the market left state governments with responsibility but no control. </p>
<p>Economically, while the creators of the market 20 years ago recognised that separating generation from transmission could undermine the coordinated development of both, they were persuaded that the gains from competition in generation would deliver more value.</p>
<p>These days, in the context of the rapid switch from a small number of ageing coal-fired generators to a larger number of new renewable-powered generators that need access to transmission, coordination between generation and transmission has become more important.</p>
<p>And the ability of suppliers to site generators in multiple locations (including on the roofs of factories and homes) rather than near coal mines which might be in other states, has made it easier for state governments to plan for self-sufficiency.</p>
<h2>What state power will look like</h2>
<p>Much remains to be worked out, but the direction is clear. </p>
<p>State governments will increasingly plan and contract for the delivery of generators and storage services themselves. </p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/373768/original/file-20201209-20-3awmfs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/373768/original/file-20201209-20-3awmfs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/373768/original/file-20201209-20-3awmfs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=971&fit=crop&dpr=1 600w, https://images.theconversation.com/files/373768/original/file-20201209-20-3awmfs.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=971&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/373768/original/file-20201209-20-3awmfs.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=971&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/373768/original/file-20201209-20-3awmfs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1220&fit=crop&dpr=1 754w, https://images.theconversation.com/files/373768/original/file-20201209-20-3awmfs.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1220&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/373768/original/file-20201209-20-3awmfs.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1220&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Retailers who own coal generators will increasingly have to buy from wind farms.</span>
</figcaption>
</figure>
<p>They will also be facilitating, and perhaps to some degree funding, the development of the transmission system. </p>
<p>Most of the assets will continue to be privately owned, but producers and storage providers will increasingly be contracting with states for access to their markets rather than competing against other producers in the national market.</p>
<p>The companies that own coal generators and supply to their own retail businesses will be the big losers. </p>
<p>Their generation will be rendered uncompetitive by wind and solar farms, and they will be forced to buy from them (and perhaps even from generators owned by state governments) in order to keep customers.</p>
<p>This is a much tougher business model than the one they have become used to.</p>
<p>But it isn’t right to say the clock has come full circle; that we are going back to the bad old days of (often self-serving) state electricity commissions. </p>
<p>There are certainly similarities, and a risk of governments planning and procuring badly and forcing customers to pay for their failures.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/pumped-hydro-isnt-our-energy-future-its-our-past-146989">Pumped hydro isn't our energy future, it's our past</a>
</strong>
</em>
</p>
<hr>
<p>But much is different. Customers are able to choose who they buy electricity from and are able to make some of it themselves if they want to.</p>
<p>This ability to choose exerts a powerful discipline. It is assisted by developments in production and storage and access to data that presents opportunities that could not have been imagined five years, much less 20 years ago. </p>
<p>There are plenty of new opportunities waiting to be explored.</p><img src="https://counter.theconversation.com/content/151018/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The Victoria Energy Policy Centre is partially funded by a research grant from the Government of Victoria</span></em></p>Australia’s biggest states are taking back control of their electricity systems, because the way we make power is changing.Bruce Mountain, Director, Victoria Energy Policy Centre, Victoria UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1510862020-11-30T19:08:15Z2020-11-30T19:08:15ZAustralia’s states have been forced to go it alone on renewable energy, but it’s a risky strategy<figure><img src="https://images.theconversation.com/files/371880/original/file-20201130-23-juyiio.jpg?ixlib=rb-1.1.0&rect=0%2C5%2C3600%2C2387&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Several Australian states are going it alone on the the energy transition. The policies adopted by New South Wales, Victoria, Queensland and others represent major departures from the existing national approach, and run counter to the <a href="https://theconversation.com/what-exactly-is-neoliberalism-84755">neoliberal</a> principles underpinning the current system. </p>
<p>Most notably, the NSW Coalition government announced its <a href="https://energy.nsw.gov.au/government-and-regulation/electricity-infrastructure-roadmap">electricity infrastructure roadmap</a>. The government says by 2030, the policy will enable A$32 billion in private sector investment, and bring 12 gigawatts of new renewable energy capacity online. This is roughly equivalent to the amount of large-scale wind and solar installed in the National Electricity Market to date.</p>
<p>The states were forced to act on renewables after the federal government effectively vacated the policy space. The NSW law has been widely hailed as a victory for the clean energy transition, but also represents a return to the centrally planned system of decades past. In fact, it may well signal the breakup of the National Electricity Market as we know it today. </p>
<p>This presents risks and challenges which, if not managed carefully, may result in white elephants and higher electricity bills for consumers. </p>
<figure class="align-center ">
<img alt="Power lines" src="https://images.theconversation.com/files/371892/original/file-20201130-15-1d3xz5t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/371892/original/file-20201130-15-1d3xz5t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=338&fit=crop&dpr=1 600w, https://images.theconversation.com/files/371892/original/file-20201130-15-1d3xz5t.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=338&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/371892/original/file-20201130-15-1d3xz5t.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=338&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/371892/original/file-20201130-15-1d3xz5t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=424&fit=crop&dpr=1 754w, https://images.theconversation.com/files/371892/original/file-20201130-15-1d3xz5t.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=424&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/371892/original/file-20201130-15-1d3xz5t.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=424&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">NSW’s policy is shaking up the national electricity market.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<h2>A very brief history of the National Electricity Market</h2>
<p>Before the 1990s, electricity supply was fundamentally understood as a state responsibility. State-owned companies were tasked with generating, distributing and supplying electricity.</p>
<p>But in the 1990s, things changed, <a href="https://www.tandfonline.com/doi/full/10.1080/23251042.2016.1155690">for several reasons</a>. First, the cost of electricity supply was rising at a concerning rate. Second, neoliberalism began to dominate economic reform in Australia and internationally. Governments saw their jobs less as providing services (such as electricity), and more as promoting markets and competition to make systems, such as electricity supply, more efficient. </p>
<p>Also in the 1990s, two key inquiries – the Productivity Commission’s <a href="https://www.pc.gov.au/inquiries/completed/energy-generation">report</a> into energy generation and distribution, and the <a href="http://ncp.ncc.gov.au/docs/National%20Competition%20Policy%20Review%20report,%20The%20Hilmer%20Report,%20August%201993.pdf">Hilmer inquiry</a> into national competition policy – identified issues in the electricity industry. These included wasteful overinvestment, largely driven by the political imperatives of keeping the lights on at all costs, and creating jobs in specific locations and electorates. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-national-electricity-market-has-served-its-purpose-time-to-move-on-80973">The national electricity market has served its purpose, time to move on</a>
</strong>
</em>
</p>
<hr>
<p>A new, reformed system, the National Electricity Market, began operating in 1998. It included all states and territories except Western Australia and the Northern Territory. In this new system, market logic – rather than central planners and bureaucrats – would decide the the location, timing and type of new energy generation investment. Private firms would supply electricity to consumers using price signals and contract markets to guide decisions. </p>
<p>Key to this new system was a set of highly prescriptive rules, and a process to develop them. This culminated in the <a href="http://www.coagenergycouncil.gov.au/publications/australian-energy-market-agreement-amended-december-2013">Australian Energy Market Agreement</a> and the establishment of three national energy market institutions we have today: </p>
<ul>
<li>Australian Energy Market Commission (AEMC), which develops the rules</li>
<li>Australian Energy Regulator (AER), which enforces the rules</li>
<li>Australian Energy Market Operator (AEMO), which operates the market and is supposed to follow the rules. </li>
</ul>
<p>This market structure, and strict separation of powers and functions, was partly to isolate policy and investments from the political whims of the day.</p>
<figure class="align-center ">
<img alt="A coal fires power station" src="https://images.theconversation.com/files/371893/original/file-20201130-21-1p3kr49.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/371893/original/file-20201130-21-1p3kr49.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/371893/original/file-20201130-21-1p3kr49.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/371893/original/file-20201130-21-1p3kr49.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/371893/original/file-20201130-21-1p3kr49.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/371893/original/file-20201130-21-1p3kr49.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/371893/original/file-20201130-21-1p3kr49.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The new system was designed to give certainty to private-sector energy investors.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<h2>Market breakdown</h2>
<p>The NSW government legislation is the latest, and perhaps most significant, in a string of policies to reject the old national market approach. Grattan Institute energy director Tony Wood <a href="https://www.afr.com/companies/energy/taylor-demands-answers-over-nsw-power-plan-20201120-p56gme">described it</a> as “the most extreme intervention we have seen to date, and moves even more closely to a centrally planned energy system and away from a market approach, than anything else I have seen to date”. </p>
<p>NSW is not alone here. In Victoria, the Andrews government is building the Southern Hemisphere’s <a href="https://www.premier.vic.gov.au/victoria-build-southern-hemispheres-biggest-battery">biggest battery</a> at Geelong, under a <a href="https://www.legislation.vic.gov.au/as-made/acts/national-electricity-victoria-amendment-act-2020">new law</a> that sits outside the national framework. And government this month also announced a <a href="https://www.premier.vic.gov.au/making-victoria-renewable-energy-powerhouse">A$550 million budget plan</a> to create six renewable energy hubs, and also bring another 600 megawatts of renewable energy generation online.</p>
<p>In recent years Queensland introduced a third state-owned electricity generator, <a href="https://cleancoqueensland.com.au/media-20190226/">CleanCo</a>, and South Australia built its <a href="https://www.ourenergyplan.sa.gov.au">battery and peaking generators</a> outside the national market framework. </p>
<p>Such interventions are not limited to the states. The federal government is building the Snowy 2.0 pumped hydro scheme. It has threatened to build a <a href="https://www.abc.net.au/news/2020-09-14/government-unveils-gas-fired-coronavirus-recovery-plan/12663214">1,000MW gas generator</a>, and has established a scheme to <a href="https://www.energy.gov.au/government-priorities/energy-programs/underwriting-new-generation-investments-program">underwrite</a> energy investments. And the Energy Security Board has the power to make rules outside the regular process, which it used most recently to tighten the standards around energy reliability. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/nsw-has-joined-china-south-korea-and-japan-as-climate-leaders-now-its-time-for-the-rest-of-australia-to-follow-149731">NSW has joined China, South Korea and Japan as climate leaders. Now it's time for the rest of Australia to follow</a>
</strong>
</em>
</p>
<hr>
<p>The breakdown can largely be sheeted home to one factor: a lack of climate policy at a national level. This has left the states with little option than to manage the energy transition, and climate action, on their own. </p>
<p>The NSW policy will undoubtedly affect projects already in the pipeline. Following the announcement, <a href="https://www.afr.com/companies/energy/agl-hits-pause-on-nsw-gas-power-after-energy-road-map-20201117-p56fev">both AGL and Energy Australia</a> put the brakes on battery and gas projects in the state. </p>
<p>And the Australian Energy Council, which represents major electricity retailers, <a href="https://www.energycouncil.com.au/news/the-nsw-electricity-plan-details-are-now-the-key/">expressed</a> “concern about its impact on the functioning of an increasingly interconnected National Electricity Market and the complexity it will certainly add to investment decisions”. </p>
<figure class="align-center ">
<img alt="Angus Taylor" src="https://images.theconversation.com/files/371894/original/file-20201130-18-1mmkbh9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/371894/original/file-20201130-18-1mmkbh9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/371894/original/file-20201130-18-1mmkbh9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/371894/original/file-20201130-18-1mmkbh9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/371894/original/file-20201130-18-1mmkbh9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/371894/original/file-20201130-18-1mmkbh9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/371894/original/file-20201130-18-1mmkbh9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Angus Taylor says the NSW plan may drive up energy prices.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<h2>Energy market 2.0?</h2>
<p>It’s hard to argue against a democratically elected state government pursuing what is within its constitutional remit – particularly given the federal failure on climate policy. But existing institutions and frameworks are not equipped to govern that kind of system. </p>
<p>So if the states do continue to go it alone, we need a new national accord which clarifies the roles and responsibilities of each government. That would ensure we don’t repeat mistakes of the past, and in particular excessive over investment for which consumers foot the bill. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/what-is-the-electricity-transmission-system-and-why-does-it-need-fixing-147903">What is the electricity transmission system, and why does it need fixing?</a>
</strong>
</em>
</p>
<hr>
<img src="https://counter.theconversation.com/content/151086/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dylan McConnell has received funding from the AEMC's Consumer Advocacy Panel and Energy Consumers Australia. He has also previous been funded by the Department of Foreign Affairs and Trade and has a research contract with Sunshot Energy. </span></em></p>The states have been forced to act alone on renewable energy after the federal government effectively vacated the policy space. But if not managed carefully, the strategy may backfire.Dylan McConnell, Research Fellow at the Australian German Climate and Energy College, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1406402020-06-17T04:24:02Z2020-06-17T04:24:02ZEnergy giants want to thwart reforms that would help renewables and lower power bills<figure><img src="https://images.theconversation.com/files/342044/original/file-20200616-23266-3qzulm.jpg?ixlib=rb-1.1.0&rect=25%2C0%2C5534%2C3709&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Darren England/AAP</span></span></figcaption></figure><p>Australia’s energy market is outdated. It doesn’t encourage competition and that’s holding back the <a href="http://www.unswlawjournal.unsw.edu.au/wp-content/uploads/2017/09/39-4-6.pdf">transition</a> to renewable energy. Important reforms to modernise the market are on the way, but big energy companies are seeking to use the cover of COVID-19 to prevent the change.</p>
<p>This is bad for consumers, and for climate action. Reform would help create a modern grid <a href="https://relp.lexxion.eu/article/RELP/2011/2/44">designed</a> around clean energy, pushing coal-fired generators to retire earlier. Over time, it would also bring down power costs for households and business.</p>
<p>Renewable energy is the cheapest form of new electricity. It’s far better for the environment than coal and gas, and can deliver reliable supplies when backed by batteries and other energy storage. </p>
<p>Instead of delaying reform, Australia should be advancing it.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/342051/original/file-20200616-23235-82b1p1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/342051/original/file-20200616-23235-82b1p1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=395&fit=crop&dpr=1 600w, https://images.theconversation.com/files/342051/original/file-20200616-23235-82b1p1.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=395&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/342051/original/file-20200616-23235-82b1p1.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=395&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/342051/original/file-20200616-23235-82b1p1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=496&fit=crop&dpr=1 754w, https://images.theconversation.com/files/342051/original/file-20200616-23235-82b1p1.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=496&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/342051/original/file-20200616-23235-82b1p1.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=496&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Wind and solar energy is better for the environment, and consumers.</span>
<span class="attribution"><span class="source">Tim Wimborne/Reuters</span></span>
</figcaption>
</figure>
<h2>What’s this all about?</h2>
<p>Regulators and governments recognise the need to modernise the rules governing the National Electricity Market. That market, established in 1998, supplies all Australian jurisdictions except Western Australia and the Northern Territory.</p>
<p>Reliable electricity requires that supply and demand be kept in balance. This balance is primarily provided by a system known as the <a href="https://www.aemc.gov.au/sites/default/files/content//Five-Minute-Settlement-directions-paper-fact-sheet-FINAL.PDF">wholesale spot market</a>. Every five minutes, electricity generators bid into the spot market, specifying how much energy they will provide at a certain price. </p>
<p>An entire <a href="http://www.coagenergycouncil.gov.au/publications/post-2025-market-design-national-electricity-market-nem">redesign</a> of the market rules is scheduled for 2025. This should make the market work efficiently and reliably as coal retires and is replaced by renewable energy.</p>
<p>In the meantime, one important rule change is due to start in July next year, known as “<a href="https://www.aemc.gov.au/rule-changes/five-minute-settlement">5-minute settlement</a>”.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/matt-canavan-says-australia-doesnt-subsidise-the-fossil-fuel-industry-an-expert-says-it-does-131200">Matt Canavan says Australia doesn't subsidise the fossil fuel industry, an expert says it does</a>
</strong>
</em>
</p>
<hr>
<p>Currently, electricity is sold and sent out from generators in 5-minute blocks. But the actual price paid for this electricity in the wholesale market is averaged every 30 minutes. This means there are six dispatch periods, each with their own price, which are then averaged out when the market is settled. </p>
<p>This strange design has enabled big electricity generators to <a href="https://www-sciencedirect-com.ezp.lib.unimelb.edu.au/science/article/pii/S0140988316301839">game the market</a>. One method involves placing high bids in the first interval, then placing low or even negative bids in the remaining five intervals. This ensures that electricity from the big generators is purchased, but that they and all other generators receive an artificially high average price for the whole 30-minute period.</p>
<p>In 2017, the Australian Energy Market Commission (AEMC) <a href="https://www.aemc.gov.au/sites/default/files/content/97d09813-a07c-49c3-9c55-288baf8936af/ERC0201-Five-Minute-Settlement-Final-Determination.PDF">decided</a> to replace 30-minute settlement with 5-minute settlement.</p>
<p><a href="https://www.aemc.gov.au/sites/default/files/content//Five-Minute-Settlement-directions-paper-fact-sheet-FINAL.PDF">The commission says</a> the current system was adopted more than 20 years ago due to technological barriers which have since been overcome. It argues moving to 5-minute settlement would better reflect the value to consumers of fast-response technologies, such as batteries storing renewable energy and so-called “demand response” (a concept we’ll explain later).</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/342058/original/file-20200616-23247-kd09nn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/342058/original/file-20200616-23247-kd09nn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/342058/original/file-20200616-23247-kd09nn.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/342058/original/file-20200616-23247-kd09nn.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/342058/original/file-20200616-23247-kd09nn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/342058/original/file-20200616-23247-kd09nn.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/342058/original/file-20200616-23247-kd09nn.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The rule change would reduce power costs for consumers.</span>
<span class="attribution"><span class="source">Brendan Esposito/AAP</span></span>
</figcaption>
</figure>
<p><a href="https://www.aemc.gov.au/rule-changes/five-minute-settlement">According to</a> the AEMC, the rule change would lead to lower wholesale costs, cutting electricity prices for consumers.</p>
<p>But on March 19 this year, the Australian Energy Council, which represents most coal-fired power stations and the big three electricity retailers, sought to delay the reform. It wrote to federal energy minister Angus Taylor and his state counterparts, arguing the pandemic means energy companies must focus on “<a href="https://www.energycouncil.com.au/analysis/covid-19-brings-reform-challenges/">critical supply and reliabilty</a>” issues, rather than implementing the rule change. </p>
<p>But energy consumption has <a href="https://www.tai.org.au/content/national-energy-emissions-audit-april-2020">barely changed</a> during the pandemic, the Australia Institute’s national energy emissions audit shows. So delaying the reform to deal with supply and reliability issues appears unjustified.</p>
<p>Despite this, the Australian Energy Market Operator has proposed delaying the change for a year. Our <a href="https://www.tai.org.au/content/delaying-energy-market-reform-increase-costs-slow-transition-renewables-think-tank-industry">submission</a>, endorsed by energy and technology leaders, opposes the delay. </p>
<p>Moves by regulators to delay another <a href="https://reneweconomy.com.au/regulators-flag-delays-to-16-energy-reform-projects-as-fossil-fuel-interests-dig-in-15284/">16 market reforms</a> due to COVID-19 also seem to be afoot.</p>
<h2>Change is possible</h2>
<p>Last week, one big rule change to the National Electricity Market <em>did</em> proceed as planned. <a href="https://www.abc.net.au/news/2020-06-11/customers-paid-for-reducing-electricity-demand-radical-change/12343790">It allows</a> “demand response” energy trading from 2021.</p>
<p><a href="http://www.tai.org.au/content/finkel%E2%80%99s-forgotten-finding-%E2%80%93-%E2%80%98negawatts%E2%80%99">Demand response</a> involves reducing energy consumption during peaks in demand, such as during heatwaves. Basically, the rule means big energy users, such as smelters and manufacturing plants, could power down in these periods, and be paid for doing so.</p>
<p>Technology pioneers such as battery entrepreneur <a href="https://www.afr.com/companies/energy/covid-19-may-delay-national-electricity-market-reform-20200419-p54l3s">Simon Hackett</a> and Atlassian chief <a href="https://www.smh.com.au/politics/federal/ambitious-energy-reforms-set-to-cut-household-power-bills-20200611-p551rs.html">Mike Cannon-Brookes</a> have backed this change. </p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1267305793033867265"}"></div></p>
<p>Australia has successfully used demand response to provide <a href="https://arena.gov.au/assets/2019/03/demand-response-rert-trial-year-1-report.pdf">emergency</a> electricity capacity and <a href="https://www.afr.com/news/demand-response-worth-half-a-liddell-to-energy-queensland-20180404-h0ybij">other</a> <a href="https://www.aemc.gov.au/rule-changes/demand-response-mechanism">benefits</a>. But it’s never been unleashed in the wholesale energy market.</p>
<p>The rule change doesn’t involve smaller users such as households. But it’s a promising start that creates new competition for fossil fuel generators and allows energy users to help make the grid more reliable.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/new-demand-response-energy-rules-sound-good-but-the-devil-is-in-the-hugely-complicated-details-120676">New demand-response energy rules sound good, but the devil is in the (hugely complicated) details</a>
</strong>
</em>
</p>
<hr>
<p>Political warfare over climate policy has held back Australia, <a href="https://onlinelibrary.wiley.com/doi/abs/10.1111/1467-8500.12328">and the electricity market</a>, for more than a decade. But energy reform that encourages greater market competition can readily be supported by political conservatives.</p>
<p>The demand-response rule change is a clear example: it has been <a href="https://www.minister.industry.gov.au/ministers/taylor/media-releases/wholesale-demand-response-help-lower-costs-and-strengthen-energy">championed by Taylor</a> and his predecessors <a href="https://www.abc.net.au/news/2017-07-13/negawatts-touted-as-solution-to-growing-energy/8707232">Josh Frydenberg</a> and <a href="https://www.theaustralian.com.au/national-affairs/climate/coalition-seeks-deal-to-cut-power-demand/news-story/5b7a3dd86ddf11c91d5f817405bb43a9">Greg Hunt</a>.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/338473/original/file-20200529-51456-mfb7ry.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/338473/original/file-20200529-51456-mfb7ry.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/338473/original/file-20200529-51456-mfb7ry.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/338473/original/file-20200529-51456-mfb7ry.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/338473/original/file-20200529-51456-mfb7ry.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/338473/original/file-20200529-51456-mfb7ry.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/338473/original/file-20200529-51456-mfb7ry.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Newly built renewable electricity is cheaper than new coal-fired power.</span>
<span class="attribution"><span class="source">Petr Josek/Reuters</span></span>
</figcaption>
</figure>
<h2>Getting future-ready</h2>
<p>Once the health crisis is over and economic recovery has begun, Australia will need the economic and social benefits of electricity market reform even more than before.</p>
<p>Such reform “<a href="https://www.tai.org.au/content/energy-reform-after-covid-19">stimulus</a>” would help ready the grid for the inevitable retirement of coal-fired power stations, such as Liddell in 2023. </p>
<p>It would also align with state government investments in renewable energy, and boost private investment in new generation (which has <a href="https://reneweconomy.com.au/cec-calls-for-action-on-grid-issues-as-renewables-investment-cut-in-half-28289/">recently slumped</a>) and <a href="https://thenewdaily.com.au/finance/finance-news/2020/05/26/coronavirus-manufacturing-industry/">large-scale batteries</a>.</p>
<p>Electricity remains Australia’s <a href="https://theconversation.com/australia-to-attend-climate-summit-empty-handed-despite-un-pleas-to-come-with-a-plan-123187">highest-polluting sector</a>. Around the world, electricity markets are planning the <a href="https://www.ren21.net/renewables-report-launch/">transition</a> from high to low emissions. </p>
<p>Delaying reform in Australia would be a major setback on the path to our essential energy transition.</p>
<p><em>Richie Merzian, Climate & Energy Program Director at The Australia Institute, contributed to this piece.</em></p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/putting-stimulus-spending-to-the-test-4-ways-a-smart-government-can-create-jobs-and-cut-emissions-140339">Putting stimulus spending to the test: 4 ways a smart government can create jobs and cut emissions</a>
</strong>
</em>
</p>
<hr>
<img src="https://counter.theconversation.com/content/140640/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Daniel J Cass is Energy Policy & Regulatory Lead at the Australia Institute and is on the board of Solar Head of State.</span></em></p>The rules governing Australia’s electricity market are more than 20 years old and no longer serve consumers, or climate action. But big energy companies are using COVID-19 to delay reform.Daniel J Cass, Research Affiliate, Sydney Business School, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1305342020-02-10T19:11:16Z2020-02-10T19:11:16ZMicrogrids: how to keep the power on when disaster hits<figure><img src="https://images.theconversation.com/files/314381/original/file-20200210-52396-dvm5ib.jpg?ixlib=rb-1.1.0&rect=0%2C331%2C4089%2C2403&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">www.shutterstock.com</span></span></figcaption></figure><p>Bushfires, storms and floods regularly leave thousands of Australian homes and businesses without power. </p>
<p><a href="https://www.abc.net.au/news/2020-02-10/sydney-wet-weather-means-warragamba-dam-levels-to-surge/11948812">Sydney’s wettest weekend in three decades</a> left more than 130,000 households without power on Sunday. </p>
<p>South Australian storms two weeks ago <a href="https://www.theage.com.au/national/victoria/power-company-warns-of-blackouts-as-heat-stretches-grid-20200131-p53wmo.html">blew over the transmission towers</a> connecting the state to the national energy grid. The <a href="https://www.9news.com.au/national/sa-power-outages-impact-thousands-severe-weather-floods-bushfires/a92c1e14-e48a-48ce-8012-231c2802433c">Royal Adelaide Hospital</a> was among the buildings affected.</p>
<p>Tens of thousands more households in <a href="https://www.abc.net.au/news/2020-01-21/thunderstorms-rumble-across-south-east-queensland/11884180">Queensland</a>, <a href="https://www.canberratimes.com.au/story/6562318/phone-power-outage-on-nsw-south-coast-could-last-days/">New South Wales</a>, <a href="https://www.canberratimes.com.au/story/6566269/power-supply-improves-but-canberrans-urged-to-be-conscious-of-electricity-use/">Australian Capital Territory</a>, <a href="https://www.afr.com/companies/energy/mass-blackouts-hit-eastern-victoria-as-fires-bring-down-lines-20191231-p53nsx">Victoria</a> and <a href="https://www.abc.net.au/news/2019-12-30/catastrophic-bushfire-conditions-thunderstorms-forecast-for-sa/11831890">South Australia</a> have endured blackouts lasting from hours to <a href="https://www.afr.com/companies/energy/mass-blackouts-hit-eastern-victoria-as-fires-bring-down-lines-20191231-p53nsx">days</a> in the past month or so due to bushfires.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/trust-me-im-an-expert-why-february-is-the-real-danger-month-for-power-blackouts-90383">Trust Me I'm An Expert: Why February is the real danger month for power blackouts</a>
</strong>
</em>
</p>
<hr>
<p>It’s timely to consider how we can build a better system – one that’s more resilient in times of disaster and also doesn’t contribute, through carbon emissions, to making disasters more frequent.</p>
<p>One part of the solution is <a href="https://www.smh.com.au/business/the-economy/like-new-york-after-sandy-bushfires-expose-major-power-grid-risks-20200109-p53q5o.html">more connectedness</a>, so one transmission line being severed is not the crisis it is now. </p>
<p>But just as important is ensuring connectedness isn’t crucial.</p>
<p>This means moving away from centralised systems – powered by a few big generators – to decentralised ones, with many local and small-scale generators. Instead of one big grid, we need many microgrids, interconnected but able to operate independently when necessary.</p>
<h2>Power in a warming world</h2>
<p>Australia’s energy infrastructure is looking increasingly fragile as global warming intensifies.</p>
<p>First, hotter and longer heatwaves put more pressure on grids. As energy <a href="https://www.aemo.com.au/-/media/Files/Media_Centre/2018/AEMO-observations_operational-and-market-challenges-to-reliability-and-security-in-the-NEM.pdf">demand spikes</a> on hot afternoons, so does <a href="https://www.aemc.gov.au/sites/default/files/2018-11/Additional%20information%20from%20AEMO%20to%20support%20its%20Enhanced%20RERT%20rule%20change%20proposal.pdf">the incidence of coal-fired generators</a> breaking down. At the same time, heatwaves reduce the capacity <a href="https://www.aemc.gov.au/sites/default/files/2018-11/Additional%20information%20from%20AEMO%20to%20support%20its%20Enhanced%20RERT%20rule%20change%20proposal.pdf">of both coal and gas generators</a>. </p>
<p>The following graph from the Australian Energy Market Operator shows how the efficiency falls for coal-power turbines, combined-cycle gas turbines and open-cycle gas turbines.</p>
<hr>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/312383/original/file-20200129-93007-k211ik.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/312383/original/file-20200129-93007-k211ik.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=368&fit=crop&dpr=1 600w, https://images.theconversation.com/files/312383/original/file-20200129-93007-k211ik.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=368&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/312383/original/file-20200129-93007-k211ik.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=368&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/312383/original/file-20200129-93007-k211ik.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=462&fit=crop&dpr=1 754w, https://images.theconversation.com/files/312383/original/file-20200129-93007-k211ik.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=462&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/312383/original/file-20200129-93007-k211ik.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=462&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">This graph shows how the efficiency falls for coal-power turbines, combined-cycle gas turbines and open-cycle gas turbines falls as the temperature increases.</span>
<span class="attribution"><span class="source">Australian Energy Market Operator</span></span>
</figcaption>
</figure>
<hr>
<p>Hotter weather also impedes the efficiency of <a href="https://www2.pvlighthouse.com.au/resources/courses/altermatt/The%20PV%20Principle/Thermodynamic%20treatment%20of%20photovoltaics.aspx">photovoltaic solar panels</a> as well as the capacity of <a href="https://www.sciencedaily.com/releases/2013/07/130719103146.htm">electrical wires to transport power</a>.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/35-degree-days-make-blackouts-more-likely-but-new-power-stations-wont-help-109085">35 degree days make blackouts more likely, but new power stations won't help</a>
</strong>
</em>
</p>
<hr>
<p>Second, hot and windy weather increases the chance of <a href="https://wildfiremitigation.tees.tamus.edu/faqs/how-power-lines-cause-wildfires">electrical wires sparking fires by contacting dry plants</a>. This is what led to some of the deadly <a href="https://knowledge.aidr.org.au/resources/bushfire-black-saturday-victoria-2009/">Black Saturday bushfires in 2009</a>. The only protection against this is to turn off power on windy days. In California such blackouts <a href="https://www.nytimes.com/2019/11/02/us/california-fires-pge-socal-edison.html">affect millions of people</a>.</p>
<p>Third, as already alluded to, a warmer climate increases the regularity and intensity of <a href="https://www.ipcc.ch/site/assets/uploads/2018/03/SREX-Chap3_FINAL-1.pdf">bushfires, floods and storms</a> – events that in recent weeks have cut off power to communities right when they needed it most.</p>
<h2>Modern microgrids</h2>
<p>To make the system more resilient, we need to ensure a local area can maintain power even when power is cut off elsewhere. This is feasible with microgrids.</p>
<p>A microgrid is simply an electricity grid built to a more local scale. The national electricity grid stretches from Port Lincoln in South Australia to Port Douglas in far-north Queensland. A microgrid might stretch no further than a few streets. It might cover an industrial estate, a town or a region. </p>
<p>Rather than relying on electricity generators hundreds or thousands of kilometres away, it has enough local generators to generally meet local demand. Though “grid-tied” – drawing or contributing power to a bigger grid as needed – it can also “island” (disconnect) and run independently. </p>
<h2>Australian demonstrations</h2>
<p>There are microgrid projects around Australia. These are preparing for a greater system transformation through ironing out problems and proving the benefits.</p>
<p>One is in the Melbourne suburb <a href="https://www.ausnetservices.com.au/Community/Mooroolbark-Mini-Grid-Project">of Mooroolbark</a>. It has demonstrated a single street (of 18 houses) can continue to operate on its own solar panels and battery storage for 22 hours before reconnecting to the national grid. </p>
<p>At a regional scale, the <a href="https://www.escri-sa.com.au/">ESCRI project near Dalrymple</a> in South Australia combines a much larger battery array with 55 wind turbines and solar systems. So long as there’s enough wind, the system can provide electricity indefinitely to 4,600 customers.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/312367/original/file-20200129-93004-hid55m.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/312367/original/file-20200129-93004-hid55m.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=315&fit=crop&dpr=1 600w, https://images.theconversation.com/files/312367/original/file-20200129-93004-hid55m.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=315&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/312367/original/file-20200129-93004-hid55m.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=315&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/312367/original/file-20200129-93004-hid55m.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=395&fit=crop&dpr=1 754w, https://images.theconversation.com/files/312367/original/file-20200129-93004-hid55m.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=395&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/312367/original/file-20200129-93004-hid55m.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=395&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">ESCRI battery at Dalrymple in South Australia.</span>
<span class="attribution"><span class="source">https://www.escri-sa.com.au/</span></span>
</figcaption>
</figure>
<h2>Managing distributed energy resources</h2>
<p>Microgrids are not only ideal for isolating regions from blackouts. They also help integrate “distributed energy resources” such as rooftop solar systems and electric vehicles, which pose a challenge to the way centralised way grids have traditionally been controlled.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/how-electric-cars-can-help-save-the-grid-73914">How electric cars can help save the grid</a>
</strong>
</em>
</p>
<hr>
<p>We should build on these strengths to reconfigure our national energy market as a grid of self-managing, self-reliant microgrids.</p>
<p>The main investment required for a “grid of microgrids” is for each region to install a battery and microgrid controller (and potentially more local generators). In remote regions this may be cheaper than the cost of maintaining <a href="https://www.aemc.gov.au/news-centre/media-releases/draft-report-new-rules-allow-distributor-led-stand-alone-power-systems">transmission lines</a>. Most of the system will continue to be connected, however, ensuring efficiency by drawing on the cheapest energy available. Only when disturbances occurred would regions isolate themselves to avoid blackouts.</p>
<p>With Energy Networks Australia, which represents energy distributors, warning power <a href="https://www.abc.net.au/news/2020-01-23/power-prices-rise-blackouts-increase-bushfire-season-intensifies/11890646">prices will have to rise</a> to cover higher insurance costs as risks increase, accelerating the transition to microgrids deserves to be a key policy for any government concerned with energy security.</p><img src="https://counter.theconversation.com/content/130534/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Bjorn Sturmberg is a Director of SunTenants, which makes solar work for rental properties, and owns shares in Solar Analytics, which monitors solar systems. He receives funding from the Australian Renewable Energy Agency and the ACT Government, and was previously a Myer Innovation Fellow.</span></em></p>Both natural disasters and electric vehicles mean we need to move away from centralised electricity systems.Bjorn Sturmberg, Research Leader, Battery Storage & Grid Integration Program at The Australian National University, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.