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Shining a light on affordable reliable electricity

By Geoff Carmody - posted Wednesday, 11 September 2019


… Matters to be examined include the following:

i.All technically feasible energy supply options should be listed. Commonwealth and State policies constraining or proscribing use of any of them should be identified. Explicit or implicit tax- and/or subsidy-equivalent penalties or rewards, by energy source use, should be listed and quantified.

ii.All technically feasible energy supply options should be ranked by (a) maintenance of power reliability, (b) their inherent contribution to grid stability, or their need for additional investments to prevent grid instability, (c) comparable costs for delivery of the same total quantum of reliable power, including reliability costs for additional required generation and storage capacity, (d) comparable emissions intensity, where possible on a full production-supply chain basis, (e) safety, and (f) ease of bringing on new supply quickly after removal of government policy impediments (if any) to their use.

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iii.Effects of government-determined energy source restrictions, and policy uncertainty about the overall climate for new electricity supply investment, should be identified and quantified. The extent

to which such restrictions also constrain the operation of existing generation supply (for example, due to inadequate repairs and maintenance) should be determined. Such effects should include, and quantify, (a) reduced operating supply times for fossil fuel generators, both base-load and 'peaker' plant, and their costs, and (b) the size and cost of 'curtailed' supply from solar and wind power.

iv.What are the merits of a national approach to all aspects of energy policy (itself the rationale for the NEM)? What are the problems with States and Territories choosing their own priorities in an interdependent NEM? In particular, should emissions reduction targets be set at the state level or nationally? Does it make sense for individual States or Territories to claim state-specific emissions reductions, when they also rely on fossil-fuelled back-up from other states when the wind doesn't blow and the sun doesn't shine?

Should emissions reductions only be measured NEM-wide?

v.What are the observed average state/territory differences in power prices and power reliability? What are the causes? Are they correlated with higher or lower penetration of renewables?

vi.Beyond government policy and government ownership matters, are there technical barriers to entry resulting in non-competitive power costs and less reliability? Is there a tension between the supply-side scale of the Australian market, and best-practice, lowest-cost, power plant supply scale? What is the best way to deal with any such tension?

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vii.Is "vertical integration" between power generators and retailers an intrinsic competition problem? If there is adequate horizontal competition between generators, and also between retailers, should there be concerns about "gentailers" per se? Should policy and regulation focus on ensuring sufficient horizontal competition for both? What barriers to entry prevent this? Can these be removed?

viii.Estimate effects on power prices of all influences in (i) to (vii) These should be quantified separately and in total.

ix.In the light of (i) to (viii), make recommendations for changes to energy policies and regulations, estimating how each would affect affordability, reliability and greenhouse gas emissions.

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About the Author

Geoff Carmody is Director, Geoff Carmody & Associates, a former co-founder of Access Economics, and before that was a senior officer in the Commonwealth Treasury. He favours a national consumption-based climate policy, preferably using a carbon tax to put a price on carbon. He has prepared papers entitled Effective climate change policy: the seven Cs. Paper #1: Some design principles for evaluating greenhouse gas abatement policies. Paper #2: Implementing design principles for effective climate change policy. Paper #3: ETS or carbon tax?

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Creative Commons LicenseThis work is licensed under a Creative Commons License.

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