By Phil Kreveld
The question posed by moderator David Speers on the ABC political leaders debate of 16 April, as to when power prices might come down, was always going to embarrass both sides of the political divide.
Governments gave the game away when they cleaned up their liabilities by selling off electricity assets. The Hilmer Review in 1993 on competition couldn’t in the long run do much about electrical energy pricing by the private sector.
And therein lies the minefield for politicians. They are not in a position to do much else than to provide subsidies (domestic batteries, direct bill reduction handouts), government investment in nuclear power stations, and capacity investment schemes in order to make the renewable transition happen and at lower energy costs to consumers if not to taxpayers.
Related article: Step on the gas to speed up renewables transition—Huh?
If one imagines a system comprising of generation, transmission and distribution, and each component puts on a profit margin, then in order to have no overall energy price increase, each of the components needs to find savings. That’s kind of tough when the three components are oligarchic—hence the AEMC and AER! But even for these worthies, it’s a tough gig.
So, does anyone know the true cost of a kilowatt-hour? Well, let’s leave that unanswered and compare consumer energy prices in the developed world—and no surprise here, we kind of fit in that band of prices, and recognise that it’s always oligarchic or monopoly systems we are dealing with elsewhere. In other words, you’d have to dig very deep to come up with ‘true costs’.
Australia’s problem is that ‘integrating’ the three components into one lowest cost system is, well—impossible! If one adds the independence of states and territories to do their own thing, the game should be given away. Renewables offer zero marginal energy cost but not the stuff associated with them; synchronous condensers, thyristor-controlled reactors and capacitors, phase shifting transformers—all associated with remote energy zones and investment in long transmission lines.
Some have put the kibosh on renewables as being responsible for high costs in electrical energy, when reflection shows that investment cost per megawatt is low compared to coal or gas fired generation. Meanwhile owners of coal-fired generation, have seen zero incentive in keeping their ageing plants running, preferring instead investment in large-scale batteries.
Our national challenge is that in the absence of an overarching engineering plan, we have allowed an ad hoc electricity system to evolve, well beyond the reach of political power. Stuffing the genie back into the bottle, i.e., renationalising electricity infrastructure, would emphasise sovereign risk to investors. Even so, opening up remote energy zones to renewables and therefore long transmission lines, and ignoring battery investment in sub-transmission at terminal stations is not making use of a growing asset in consumer energy resources. It is less challenging, catering to existing competitive markets of generation and transmission, once envisioned by Fred Hilmer, but now holding back cost-effective engineering measures.
Related article: Prolonging coal closures puts affordable power supply at risk
The otherwise mainly restrained and generally courteous arguments and exchanges between Albanese and Dutton, when it came to electricity, were unconvincing, and essentially statements of belief rather than facts. It would be a relief if climate change (are you a believer or are you not) were finally put aside and that the focus would be on ‘here and now’ technologies; large batteries, voltage-forming inverters, off-shore wind system IV turbines, bifacial solar panel farms, static synchronous compensators, etc. That would require a national engineering summit followed by a national engineering plan, confining investment areas by type and location, accordingly.
Would it bring electricity prices down? Not likely, but it might well ease subvention requirements on future governments, making us all better off in the longer run.
