Creation of a state energy target likely to drive up electricity costs

//Creation of a state energy target likely to drive up electricity costs

Creation of a state energy target likely to drive up electricity costs

03 June, 2017

Adam Langenberg

Courtesy of the Advertiser

THE creation of a state energy target is likely to drive up electricity costs and do little to shore up the power grid’s reliability, the Energy Users Association of Australia has warned.

And its calls to delay a key part of the State Government’s $550 million energy plan – set to come into effect on July 1 – have been echoed by a major energy stakeholder group.

The target creates an incentive, through a certificate system, for gas and renewable energy generators to provide 4500GWh of electricity in 2017-18. Under the Government’s draft regulations, the target will rise slightly each year until 2024-25.

State Energy Minister Tom Koutsantonis says it will increase competition and lower wholesale electricity prices.

But EUAA chief executive Andrew Richards said preventing ­generators that produce synthetic inertia, such as wind and solar batteries, from contributing to the target was problematic.

“This leads us to conclude that existing gas-fired generators, who are also retailers, are likely to be the sole participants,” Mr Richards said.

“There will be little opportunity for new entrants who would need to compete against existing assets largely operating in a ‘business as usual’ mode.”

The high price of gas, the limitation on technology and the size of the SA energy market meant customers would be left with “few options”, he said.

“Given the potential of significant cost impacts on South Australian consumers, we strongly recommend the Government extend the period of consultation,” Mr Richards said.

“And it should delay the implementation of the scheme until such time that further technical and economic impact assessments can be undertaken.”

Australian Energy Council general manager Kieran Donoghue told a parliamentary committee on Friday that the target was a product of “sub-optimal policy development”.

Mr Donoghue called for Mr Koutsantonis to delay its introduction until January to give energy retailers time to adjust their systems and set prices accordingly.

“I should say as well we are not entirely clear of the rationale for having this target alongside all the other elements of the energy security plan,” he said.

A State Government spokesman said the possibility of the target starting later had been raised by many during a stakeholder submissions period, and would be “considered along with other feedback”.

The Government has confirmed synthetic generation will not count towards the target in its current form, but is tight-lipped on whether that will remain the case when final regulations are handed down.

Mr Koutsantonis said driving greater levels of local generation, instead of interstate exports, would benefit grid security. He said the Government had been forced to introduce the target because of “a lack of any coherent national energy policy”, but would fold it into a national scheme if one was introduced.

Chief scientist Alan Finkel is set to hand down his report on the national energy market on Friday.

2017-06-05T10:12:04+11:00 June 3rd, 2017|