The leaders of a number of major energy companies have published an open letter, co-ordinated by the Australia Institute, to state and federal energy ministers and the Energy Security Board (ESB), opposing a key recommendation from the ESB to create a new market for ‘physical reliability’ that would subsidise loss-making coal power stations.
The open letter signatories include Tesla Energy, industrial and commercial retailer Flow Power, Australia’s only co-operative energy retailer Enova Community Power, residential battery innovator Reposit and Amber Electric, which uses wholesale pass-through prices that encourage households to reduce consumption when supply is tight.
In part, the open letter reads:
Unfortunately, the ESB has proposed a new reliability mechanism that would prop up unprofitable coal generators, increasing costs and delaying the clean energy transition. Ageing coal power stations are becoming less reliable as shown by recent events in Queensland.
A new ‘Physical Retailer Reliability Obligation’ (PRRO) would force retailers to buy new certificates from existing coal and gas generators; effectively a subsidy from consumers to generators. This risks significantly increasing energy bills without improving reliability.
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The PRRO would increase market concentrations by undermining smaller retailers. This would threaten innovation and competition which the NEM needs to help consumers access new technologies and reduce costs.
Instead, the solution is to put consumers in charge of their energy to help them save money, and to embrace the opportunities presented by the falling price of renewables and energy storage. This will provide consumers with more affordable, reliable and clean power. Governments should support flexible, reliable options such as demand response, battery storage or pumped hydro, rather than give financial windfalls to old, inflexible and polluting generators.
“The proposed ‘Physical Retailer Reliability Obligation’ (PRRO) would reduce competition in the NEM, lock in high-emissions coal and increase prices for consumers,” said Dan Cass, energy and regulatory lead at the Australia Institute climate and energy program.
“Such an intervention has been widely opposed by industry and consumer groups, including global investors such as Ibedrola and Neoen and government owned generators Stanwell and Snowy Hydro.”
The open letter, pictured below, has been published as a full-page advertisement in today’s Australian Financial Review (Wednesday, August 25). The Australia Institute was invited by the Energy Security Board to provide expert advice to the Post 2025 redesign project.