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In an electricity meltdown, how do Canberra’s prices compare?

By Genevieve Jacobs 26 November 2018 19

The ACT’s renewable energy commitment gave certainty to investors in the market. File photo.

The storm over electricity prices will supercharge the forthcoming Federal election as politicians argue over whether changing our power sources will increase our costs. Canberra’s commitment to renewables is the highest in the country. So how do our electricity prices compare in the big argument over what keeps our lights on?

The answer is, very well, but for a variety of fairly complicated reasons. Richard Merzian is the Climate and Energy Programme director at The Australia Institute, which has been analysing energy policy for more than a decade.

“In a broad sense, Canberra has some of the lowest retail electricity prices in the country. Generally, we rate very well when we compare ourselves as part of the National Energy Network across the eastern and southern states,” he says. But while renewables form part of the reason for those prices, so do policy choices.

One of the major differences is our regulated default price, replicated only in Tasmania and regional Queensland.  The government in the ACT takes a leading role in setting what the electricity price should be through an independent body. That creates a marker so that retail energy companies have to justify why they’re offering higher prices. Merzian describes this as “your Black and Gold offer. You know you’re paying a premium or you get the standard prices”, adding that it cuts through the confusion created by retail deals.

“When the ACCC did their major study on retail electricity, one of their recommendations was that the entire country should adopt the default price. Minister (Angus) Taylor has committed to taking that recommendation forward, as has the Opposition,” he says.

The ACT is a small network, so our costs are lower than much larger areas like NSW, but Merzian says the impact of renewables and how the Territory government has managed the market is a major reason for our current low prices.

“We have to think back to 2013, 2014 when the ACT wanted to ramp up renewables at the same time as the Abbott government was walking away from any commitment on climate and energy, removing the carbon prices and watering down the Renewable Energy Target,” he says.

“That sent a strong signal to the market that the Federal government wouldn’t support renewables. The ACT had the most strident response across the jurisdictions by holding the reverse auction, finding the cheapest price for energy and locking it in. So now we are getting a really sweet deal for long-term affordable energy that also meets renewable energy targets.”

Merzian says that renewable energy projects typically have large upfront costs but are cheap to run thereafter. To obtain financing, these projects need long-term contracts. When the ACT locked in their prices, it delivered certainty for renewable energy developers and investors.

“Back in 2014, it was dire straits for the renewable sector,” Merzian says. “Renewables were packing up shop everywhere. The ACT was willing to put up some serious contracts, along with an obligation for companies to set up their business operations here in Canberra.”

But if South Australia also has a large renewable component to their energy supply, why are their prices so much higher than ours? Richard Merzian says that it’s not the renewable component that spikes prices, but a combination of network upgrades, increases in component costs like gas and retail price setting.

And, he says, customers understand this very well. The Australia Institute has carried out their national Climate of the Nation research over ten years. Those results show that householders identify excessive profit margins, grid privatisation, Federal policy uncertainty and poor policy outcomes as the major reasons for price hikes.

The situation hasn’t been helped by the lack of a long-term energy policy for more than 15 years. Merzian says there seems to be some agreement, at least, on the Federal level that a partially bipartisan energy policy has to be developed.

“Both sides recognise we need a new generation policy and will put government money and long-term contracts into making that happen. The difference is around the choice of technology because the current government is committed to coal as part of the mix.

“But in the end, it’s likely that the money will go towards exactly what the ACT has done, running a reverse auction for new generation energy. That will drive innovation and jobs when the majority of coal-fired power stations are at end of their life.”

 


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19 Responses to
In an electricity meltdown, how do Canberra’s prices compare?
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Capital Retro 7:14 am 28 Nov 18

Jason Good, you need to stop reading the Guardian and get some accurate information:

https://www.businessinsider.com.au/china-coal-fired-power-station-buildup-2018-9

Jason Good 6:28 am 28 Nov 18

Coal generation is on its last legs:

‘Brown coal generation hits record low, as black coal units trip in Queensland heatwave’

https://reneweconomy.com.au/brown-coal-generation-hits-record-low-as-black-coal-units-trip-in-queensland-heatwave-97575/

Racheal Green 5:27 pm 27 Nov 18

Electricity is cheaper yes I do agree but gas and water are expensive so any savings in the family budget are immediately eaten up by the other two utilities

Capital Retro 9:41 am 27 Nov 18

Conveniently not in the news is the failure of Icon’s 600kW mini (minuscule?) hydro electricity generator at Burra Creek where the (pumped) water from the Murrumbidgee River at Angle Crossing is fed into the Googong Water Transfer pipeline.

This started working part time shortly after it was commissioned. As far as I know, it is not working at present.

That means the 350 homes that were powered by the net output from this token generator are using evil coal generated electricity again but I haven’t heard any complaints.

The Achilles Heel of hydro is that it needs constant water which depends on nature (climate change if you like).

Only coal power delivers reliability and certainty.

    Lord Fenwick 1:31 pm 27 Nov 18

    Coal generated electricity uses water too. If there’s no water there is nothing to boil so it has the same Achilles Heel, as you put it.

    The difference, however, is that water used to generate hydroelectricity is not released to the atmosphere as steam so it is available for other uses downstream.

    Using your argument, hydro comes out in front.

    Capital Retro 6:32 pm 27 Nov 18

    Of course hydro is the best option for clean power and it’s generally more reliable than wind or solar.

    The problem is that mainland Australia just hasn’t got the abundant hydro sources that Scandinavian countries (even New Zealand) have. Pumped-hydro is only as good as the sources of electricity that move it back up the hill and that process is very expensive.

    That leaves coal as the only reliable base load source. China and India are building one new coal powered electricity generator a week and most of them are powered by Australia coal.

    Moral vanity is destroying our standard of living.

    chewy14 6:32 pm 27 Nov 18

    Ah, I think you should probably do some research there rather than relying on “as far as you know”.

    The hydro was only designed to recover part of the electricity used in pumping the water from the river to Burra creek.

    It’s not “working” at present because they haven’t been pumping any water at all because the dams are too full to need it.

    https://the-riotact.com/mini-hydro-going-in-at-burra-cree/71952

    Capital Retro 7:10 am 28 Nov 18

    Please keep up with the news, chewy14:

    https://www.canberratimes.com.au/politics/act/canberra-s-emergency-water-pipeline-makes-short-lived-debut-20181112-p50fk5.html

    The local dams are very low but looking at the weather radar today, that could change very soon.

    Climate change is a two-way street.

    chewy14 9:22 am 28 Nov 18

    Capital,
    How does that relate to my comment or your claim that the hydro has failed?

    You’re misreading the article.

    As above, the hydro system isnt designed as straight electricity generation, it’s to recapture some of the electricity they use in pumping the water.

    No pumping, no need to recapture energy that hasn’t been used.

    And of course they don’t pump when there’s not much water in the river, the goverment mandates environmental flows to protect the river.

    After this rain, they could probably turn it back on if they needed too but it might not be necessary.

Capital Retro 9:25 am 27 Nov 18

Renewables like solar fail every time the the sun sets.
That’s at least 365 time a year.

Jason Good 7:16 am 27 Nov 18

Renewables are much more reliable than fossil fuel generation. Coal and gas generators fail much more frequently than renewables. According to the Australia Institute’s ‘Gas and coal watch’, Australian coal or gas generators have failed 135 times in the last year: http://www.tai.org.au/gas-coal-watch

Capital Retro 6:07 pm 26 Nov 18

This appears to be the latest: https://www.9news.com.au/2018/10/15/11/31/south-australia-power-outage-thousands-without-electricity-storms

I can’t remember when the last power outage in Canberra was caused by a storm.

chewy14 12:23 pm 26 Nov 18

Oh please.

The reason the ACT has lower prices than elsewhere is because we don’t have to distribute electricity hundreds or thousands of kilometres away to remote customers like most of the other states.

The ACT government’s investment in renewable energy projects has only had one effect to ACT prices, to make them higher than they would otherwise have been.

And that’s not to say that investing in those projects is necessarily a bad thing but it’s a fact.

Matthew Maddigan 7:54 am 26 Nov 18

Canberra produces less than 2% of its own power and relies almost entirely on the snowy hydro scheme. If NSW and Vic relied on it as heavily as Canberra, prices would sky rocket due to increased demand or there’d be power shortages as the ACT has no way of making up the shortfall on their own. Transitioning to renewable energy sources are a good idea, but the ACTs model has no relevance to the rest of the country nor can they claim to have achieved such high usage through their own work.

    Guy Manton 8:27 am 26 Nov 18

    Matthew Maddigan source? Im curious as to whether the contracts we signed are with interstate providers due to ACTs small geographic footprint.

    Justin Watson 10:03 am 26 Nov 18

    The ACT has deals with wind and solar plants outside our borders to supply far more than 2% of the electricity. We might only generate 2% within our borders, but these wind and solar plants outside the ACT may not have been built if the ACT didn't pay for the electricity. We still rely on having coal and gas generated electricity being put into the grid as well. However, the reason our electricity is significantly cheaper compared to NSW is due to the deals with solar and wind farms.

    Stuart Herring 9:27 pm 26 Nov 18

    The "it's not normal it won't translate elsewhere" response is used on literally every article where someone doesn't want to hear something.

    It also comes with an implied ".. And so we should therefore ignore everything from this particular case and carry on exactly as we are now"

    Which is, quite simply, stupid.

Capital Retro 7:11 am 26 Nov 18

If we insist on becoming over-weighted on supply from renewables we will have the same problems as South Australia had and continues to have. Victoria has chosen the same path.

The outcome will be regular, random periods of no electricity at all so the matter of what price we are paying becomes academic. The only solution is for a gas-peaker to be built in the ACT and factoring that into pricing will give us the most expensive electricity in the world.

    Jim9 12:58 pm 26 Nov 18

    I’m interest CR – since that major blackout issue a couple of years back, just how many major issues have South Australia had…. I’m not sure its any where out of step with any other jurisdiction in the NEM during the same period…

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