- Energy spot and futures prices not showing signs of going down
- Businesses must act now to avoid further pain
- Free market is not working, national policy needed
Political consensus on a national energy policy is needed for an efficient economy while providing certainty and stability for businesses and households, according to ERM Power CEO Tony Bellas.
Mr Bellas’ comments come during a flurry of activity by state and federal governments in what is largely being seen as a knee-jerk reaction to Australia’s looming power crisis.
South Australia intends to go it alone, announcing investment in a huge battery farm, a new gas-fired plant and new legislation to give the state energy minister powers to turn on interstate interconnectors at times of need.
The Federal Government, meanwhile, has announced the expansion of Snowy Hydro and Victoria seems content to let things lie, even as Hazelwood powered down. New South Wales seems to be dormant and not doing much in terms of boosting supply for power-hungry Sydney.
Energy spot and futures prices not showing any signs of going down
The announced measures will have an effect on pricing in the long term, but short term spot prices and futures are exorbitantly high and show no sign of dropping. Federal Government has announced a probe into alleged price gouging by the big electricity retailers and that seems to have put a lid – at least for now – on any further increases.
But the fact of the matter remains that businesses and households are still paying double what they paid for energy only two years ago. The situation is not sustainable and at present, the only way for businesses to shield themselves from this ever-increasing burden is by eliminating waste, auditing consumption and installing self-power generation, such as solar panels.
Bellas’ version of the facts
- We have abundant baseload capacity in the National Electricity Market (NEM), so much so that some older coal-fired plant and some gas-fired plant are being either mothballed or shut down.
- Truckloads of renewable but intermittent power are being shoe-horned into this over-supplied market by Federal and State Governments mandating renewables targets in their eagerness to push their green credentials.
- Transmission and distribution networks have been overbuilt or gold plated, mainly due to unnecessarily onerous performance standards imposed by Government regulators or failure by regulators to prevent network companies gaming the system – and network costs account for more than half the average household electricity bill.
- The national grid is highly robust but occasionally has issues during bush fires, big storms or cyclones, which appear to be more frequent. Blackouts, while well publicised, are rare.
Bellas says the system is “not broken” but in a period of transition where carbon is being phased out in favour of renewable source energy. This may well be true, but the facts that businesses and households are facing are that Australians are paying through the nose for energy and NSW in particular, is paying some of the highest rates in the world.
To this end, many are trying to keep their businesses and households afloat by investing in renewable sources of behind the meter energy. Bellas says this is causing problems: “The NEM is being affected by disruptors including energy storage via batteries, lower-cost solar PV appliances, new forms of energy efficiency and energy management via smart meters and other technologies, and the ever-shifting policy and regulatory regimes. These conditions have resulted in bouts of market instability and price volatility.
How are businesses going to survive crippling energy bills?
That is fine to say if you are a huge energy retailer, but how are businesses supposed to survive in the face of such crippling bills?
The energy retailers have veiled their anger at the government. Bellas says state governments and the Federal Government are intervening in a market they created and in which the private sector has invested billions of dollars.
He said that ad hoc responses to the issue have shown little consideration for long-term outcomes in the cost, reliability and sustainability of energy for households and for business.
It is clear that the market has not functioned as it should have. We live in a surreal situation where one of the most resource-rich nations in the world has to ship gas from Asia to its shores and re-purchase it, rather than pipe it across the country because it is even more expensive.
The market is broken, and it needs to be fixed. It is not going to right itself because power suppliers simply pass costs (real and imagined) onto the end-user.
What does this mean for my business?
- Energy deals are expensive and show no sign of going down soon. Leading Edge can secure the best energy deal tailored to your needs
- Businesses need to become self-sufficient. Leading Edge Energy can help guide you to invest in solar power generation with maximum return on investment
- Every bit counts. Leading Edge Energy can audit your power use and identify ways in which to eliminate waste
About Leading Edge Energy:
Leading Edge Energy is an integrated energy cost reduction solutions provider. We offer a bespoke service to our clients by following our standard “Loop” methodology. In simple terms, we help our clients reduce their exposure to the cost of grid sourced energy by guiding them through a path towards energy cost reduction. We follow the path of the highest return on investment to deliver the best possible value to our clients.
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