About Peter and David's little plan to put a fast transitioning to renewable energy on the backburner in favour of creating a nuclear power industry in Australia

 

It would appear as though the two Coalition opposition parties are determined to take the creation of a nuclear power industry to the 2025 federal general election.

It is being presented as cost-effective and relatively risk free way to provide for Australia's future energy needs.

So here are some basic facts to consider when evaluating the propaganda beginning to spread across national newspapers and social media.

CAPITOL COSTS

Annual change in capital costs: Across the board, new build costs have generally stabilised as the impacts of inflation ease. However, cost pressure remains on gas, onshore wind and nuclear SMR. [Draft GenCost Report, December 2023]

The CSIRO Draft GenCost Report 2023-24 stated that Nuclear small modular reactors (SMRs) emerged as the highest-cost technology explored in the report. This corresponds with new data from the most advanced SMR project in the US. 

SMRs are the type of nuclear power facility favoured by Liberal MP for Dickson & Leader of the Parliamentary Liberal Party, Peter Dutton and Nationals MP for Maranoa and Leader of the Parliamentary National Party, David Littleproud.

SMRs at this stage exist only as either prototype drawings or development projects - appearing at this point in time to be unrealised technology.

According to the current Draft GenCost Report:

Significant increase in nuclear small modular reactor costs

The cost of nuclear small modular reactors (SMR) has been a contentious issue in GenCost for many years with conflicting data published by other groups proposing lower costs than those assumed in GenCost (ES Figure 0-3). UAMPS (Utah Associated Municipal Power Systems) is a US regional coalition that develops local government owned electricity generation projects. Up until the project’s cancellation in November 2023, UAMP was the developer of a nuclear SMR project called the Carbon Free Power Project (CFPP) with a gross capacity of 462MW. It was planned to be fully operational by 2030. After conversion to 2023 Australian dollars, project costs were estimated in 2020 to be $18,200/kW which is only slightly below the level that GenCost had been applying ($19,000kW).

While the EFSC Investment Group states that estimates suggest that the construction cost of a coal-fired thermal power plant can range from less than $1,000 to $4,500 per each kilowatt of installed capacity.

That's a whopping $14,000 difference at the high end of the costing range. Making these boutique smaller nuclear power units very expensive if they can be realised.

Then there is the limited service area of nuclear small module reactors (SMRs). Based on the U.S. Carbon Free Power Project SMR with a proposed gross capacity of 462MW, such an SMR would be able to supply a mere est. 31,862 residential households according to Ausgrid 2022-23 electricity consumption figures. Hardly value for money given the high cost to Treasury and Australian taxpayers of building and bringing online these small power plants, by CSIRO estimates around $8.7 billion per SMR.

Lake Macquarie City Library reveals that: The total cost of the Eraring Power Station, built by the NSW Electricity Commission was $1.653 billion. Work commenced with the earthworks on the site in 1976, followed by construction of the station beginning in 1977. Several of the larger components of the station were shipped through the Swansea channel, up Lake Macquarie to the Eraring site. The first generating unit was brought into service in March, 1982, the second and third units in 1983 and the fourth unit in 1984.

The Coalition Shadow Minister for Climate Change and Energy is fond of tossing out timescales for nuclear power stations builds - from around 5 years to complete construction of an small modular reactor (SMR) to 10-12 years for a large-scale nuclear power plant.

In the first instance it's hard to assign a build timeline to an SMR because one hasn't actually been built yet.

In the second instance, the build time lines for existing large-scale nuclear reactors ranging from 1,000MW-e to 1,350MW-e capacity is fairly well known and historically construction completion took between 19.66 to 25.08 years. These days the optimistic theoretical time given for completed construction of a 1,000MW-e nuclear power station is seven and a half years.

In the case of a nuclear power plant with the same capacity as the Eraring coal-fired power station, without factoring in the long lead-in years of legislative framing, planning and approval processes, actual construction could be expected to be completed in 18 years at the earliest. While the World Nuclear Organisation figures would put the overnight cost of this nuclear power plant in Australian dollars at $9,115 per KW-e as a starting point which comes in at over $17.6 million overnight or $6.4 billion over 365 nights.

So if Dutton & Co were to form government in 2025 and hit the ground running - by my reckoning they might, just might, have one solitary nuclear power station built and online by 2058 at a cost on current pricing in the vicinity of $21 billion. Having achieved nothing nuclear towards the net zero by 2050 policy. 

It is interesting to note that the Coalition parties see coal-fired generation as remaining critical to Australia's electricity supply and the Liberal Party makes a point of saying so in its 2025 re-election plan for the resources sector. A plan that doesn't even include the words "nuclear power stations" Indeed one might suspect Dutton and Littleproud of raising the possibility of future nuclear energy as an excuse to maintain all existing coal-fired power stations should they win government again and, that it what makes this particular energy option so attractive a proposition.

Dutton & his nuclear cheer squad are also saying that if elected to federal government that they will not be ruling out including in Coalition policy a crossover to large-scale nuclear power generation on retired or soon to be retired coal-fired power station sites.

A fact that should give communities in places like the Lake Macquarie region reason to pause and consider, given Eraring Power Station is due for retirement soon.

The risks involved with a 2,922MW capacity coal-fired power station already drawing 11 billion litres of salt water a day from Lake Macquarie and returning it after cooling, is a different proposition to a full-scale nuclear power plant of similar capacity drawing at least 7.9 million litres of water a day from an as yet unidentified source, contaminating an unknown percentage of that water with radionuclides – unstable atoms with excess energy – and then seeking to return supposedly 'cleaned' water to the lake.

Given uncontrolled water and liquid effluent releases from nuclear power stations have occurred in the past, some contaminating groundwater, this is one more worry our regional communities do not need.

AUSTRALIA: the 13th Climate of the Nation annual research report was published in October 2020

The Australia Institute released its Climate of the Nation 2020 annual research report this month.

This is the third year the Institute has published this research, the ten years previous to 2018 the survey was published by the Climate Institute.

The quantitative survey was conducted on the YouGov Galaxy Online Omnibus between 14 July and 22 July 2020 and the sample comprised 1,998 Australians aged 18 years and older distributed throughout Australia.

While the qualitative survey comprised of four online focus groups were carried out on 31 August and 1 September 2020. The groups were conducted over Zoom with 21 participants in total. The target group was female swing voters from the federal electorates of Lindsay and Macquarie in NSW, and Lilley and Petrie in Queensland who believe in human caused climate change.

Key Findings In "Climate of the Nation 2020":

80% of Australians think we are already experiencing the impact of climate change

82% of Australians are concerned that climate change will result in more bushfires

83% of Australians support a phase-out of coalfired power stations

79% of Australians rank solar in their top three preferred energy sources

40x is the factor by which Australians overestimate gas industry employment

45x is the factor by which Australians overestimate the oil and gas industry’s contribution to Commonwealth revenue

65% of Australians support the introduction of a levy on Australia’s fossil fuel exports to help pay for climate disasters

65% of Australians think the Australian Government should stop new coal mines

71% think Australia should be a world leader in finding solutions to climate change

72% of Australians believe mining companies should be liable for any land or water contamination caused by fracking

74% of Australians believe governments should plan to phase out coal mining and transition to other industries

68% of Australians support a national target for net zero emissions by 2050

77% of Australians agree tackling climate change creates opportunities in clean energy for new jobs and investment

75% of Australians would consider reducing electricity during times of high demand if they were paid to do so

12% of Australians would prefer Australia’s economic recovery to be primarily powered by gas, compared to 59% who prefer it to be powered by investment in renewables

The Australia Institute: Climate of the Nation 2020 research report by clarencegirl on Scribd

https://www.scribd.com/document/482520496/The-Australia-Institute-Climate-of-the-Nation-2020-research-report

Renewable energy power generation continues to be predicted as cheaper than Morrison Government's favoured fossil fuel alternatives

Renew Economy, 6 February 2010:

An updated study on current and future generation costs by the CSIRO and the Australian Energy Market Operator confirms that wind, solar and storage technologies are by far the cheapest form of low carbon options for Australia, and are likely to dominate the global energy mix in coming decades.

The first report, GenCost 2018, identified that wind and solar were by far the cheapest forms of new generation technologies, clearly cheaper than coal, and even when combined with storage, remained easily the cheapest form low carbon electricity options.

A draft of the updated study, GenCost 2019-20, has been quietly posted on the AEMO website and confirms that wind and solar and storage remain the cheapest technologies, now and into the future, and much cheaper than the technologies promoted by the Australian government – gas, carbon capture, and nuclear.

The study is jointly funded by the CSIRO and AEMO, although CSIRO took carriage of the report, along with advisors Aurecon, who succeeded GHD which did the first version.

Its capital cost estimates – which assume continue cost reductions for solar, wind and dramatic falls for batteries, remain little changed from the 2018 version, although wind cost reductions are lower than expected last year…..

Read the full draft report:

GenCost 2019-20: preliminary results for stakeholder review Draft for review, Paul Graham, Jenny Hayward, James Foster and Lisa Havas December 2019.

That neither expert opinion nor the Australian Government's international obligations matter to Prime Minister Scott Morrison and his hard right cronies is demonstrated by the fact that they are prepared to spend up to $4 million on a feasibility study for a 1GW coal-fired power plant at Collinsville in Queensland, with coal presumably sourced from a nearby open-cut coal mine owned by Glencore.

Glencore stategically places most of its political donations with state governments of the day. 

Byron DA for largest coastal solar farm in NSW being progressed

Myocum district, Byron Shire

The Northern Star, 25 May 2019, p.8:

A solar farm flagged for Byron Shire would be the biggest of its kind east of the ranges in New South Wales, according to Byron Shire mayor Simon Richardson.

Cr Richardson said the “massive” five megawatt solar farm planned for land adjacent to the shire’s tip at Myocum would be a wise investment.

Coolamon Energy lodged a development application for the $6.5 million project last month, which proposes building the large-scale facility at Grays Lane, with the solar panels covering 6.3ha of the 73.53ha site.

At a meeting on Thursday councillors voted to spend $465,000 on a final feasibility study for the project.

Cr Richardson said the council had already done a lot of business modelling and cost-benefit analysis for the project.

In the DA, construction is estimated to take 12-14 weeks.

The applicant claimed the project would create jobs and help meet Byron Shire’s electricity demands.

Climate Change 2018: local government putting Morrison & Co to shame

Clarence Valley Council, media release, 29 November 2018:

Council aims to be greenhouse gas emission free

THE Clarence Valley Council has set a target to cut its net greenhouse gas emissions to zero by 2050.

The first step in reaching that target will be to cut greenhouse gas emissions (excluding landfill emissions) to 40% below 2016/17 levels by 2030.

It has also adopted a target of supplying half of its own electricity demand from renewable energy sources by 2030, with the long-term goal to secure all electricity from renewable energy.

Council’s waste and sustainability coordinator, Ken Wilson, said council had engaged consultants, 100% Renewable, to help with the development of renewable energy and greenhouse gas emission reduction targets in line with council’s climate change policy.

“Their report shows council is performing well, with about 8.3% of the energy used by council coming from renewable energy – primarily rooftop solar,” he said.

“Council currently has 646.3kw of PV Solar generating capacity.

“To achieve the short-term target the report assessed 47 initiatives involving solar photovoltaic and battery storage, street and park lighting, and energy efficiency costing in the order of $5,764,794.

Council plans to implement these measures over five years, which should help council meet its targets and achieve financial savings well before 2030.

“These initiatives have a payback of between four and eight years. Initiatives involving battery storage are expected to become more cost effective over the next few years, which will improve the payback period.

“Anticipated savings will be reflected in facility operating costs and will be ongoing. The average payback period is 6.5 years.

“These projects do not include a current proposal under investigation to develop a mini-hydro system at the Rushforth Road reservoir.

“The recommended targets are considered achievable and cost-effective.”

Release ends.

Scott Morrison doesn't know watt's watt

This was the ‘interim’ Australian Prime Minister Scott Morrison on ABC TV The Drum, 23 September 2018:

SCOTT MORRISON: I want more dispatchable power in the system.

ALAN JONES: Could you stop using the word dispatchable? Out there they don’t understand that.

SCOTT MORRISON: Well, real power, OK?

ALAN JONES: Real power.

SCOTT MORRISON: Well, fair dinkum power.

So what exactly is this “dispatchable power” the Prime Minister is talking about whenever he cites “fair dinkum power” that “works when the sun isn’t shining and the wind isn’t blowing”.

This is what Energy Education:has to say on the subject:

Dispatchable source of electricity

A dispatchable source of electricity refers to an electrical power system, such as a power plant, that can be turned on or off; in other words they can adjust their power output supplied to the electrical grid on demand.[2] Most conventional power sources such as coal or natural gas power plants are dispatchable in order to meet the always changing electricity demands of the population. In contrast, many renewable energysources are intermittent and non-dispatchable, such as wind power or solar power which can only generate electricity while their energy flow is input on them.

Dispatch times

Dispatchable sources must be able to ramp up or shut down relatively quickly in time intervals within a few seconds even up to a couple of hours, depending on the need for electricity. Different types of power plants have different dispatch times:[3]

Fast (seconds)

Capacitors are able to dispatch within milliseconds if they need to, due to the energy stored in them already being electrical, whereas in other types of power storage such as chemical batteries the power must be converted into electrical energy.

Hydroelectric facilities are also able to dispatch extremely quickly; for instance the Dinorwig hydro power station can reach its maximum generation in less than 16 seconds.[4]

Medium (minutes)

Natural gas turbines are a very common dispatchable source, and they can generally be ramped up in minutes.

Solar thermal power plants can utilize systems of efficient thermal energy storage. It is possible to design these systems to be dispatchable on roughly equivalent timeframes to natural gas turbines.

Slow (hours)

While these systems are typically regarded as only providing baseload power, they often have some flexibility.

Biomass

Nuclear

Coal

Many coal and biomass plants can be fired up from cold within a few hours. Although nuclear power plants may take a while to get going, they must be able to shut down in seconds to ensure safety in the case of a meltdown.

What this tells us is that renewable energy can and is used as “dispatchable power” and often responds faster than coal-fired power.

Battery storage by way of home battery installations and mega battery installations such as the Tesla system in South Australia are just two successful examples of storing renewable power for later use – making it dispatchable power.

According to the Melbourne Energy Institute, South Australia’s new mix of renewables and traditional source of energy is working well.

What has become increasingly obvious over the years is that once renewable energy via wind and solar reaches a reasonable scale it becomes cheaper than coal and other fossil fuels. That is where Australia is now.

Yet Scott Morrison apparently doesn’t understand how electricity generation and the national power grid work – it’s a though he has been asleep for the last decade. Because he appears to believe that renewable energy systems have not evolved to meet market demands.

Therefore, based on his erroneous views Morrison states he is “going to force them [electricity wholesalers] to put more fair dinkum, reliable energy, power, into the system”.

Which in his mind means more coal-fired power.

Expensive, polluting, coal-fired power supplying electricity to Australian homes at maximum cost to ordinary consumers.

North Coast Environment Council Global Position Statement Says NO to Wood-fired Power Stations

North Coast Environment Council: Global Statement Against Wood FiredPower Stations, 24 October 2018 by clarencegirl on Scribd

https://www.scribd.com/document/391698905/North-Coast-Environment-Council-Global-Statement-Against-Wood-FiredPower-Stations-24-October-2018

When you are on a low income and you rent governments have a tendency to place you in the too hard basket when it comes to clean renewable energy schemes

The Australian Census found that in 2018 the NSW state population stood at 7.48 million people.

An est. 826,922 or 31.8 per cent of these individuals lived in rental accommodation.

Over 15.2 per cent of NSW renting households are paying between est. 25.1% and 50% or more of gross weekly household income in rent.

These people cannot afford to enter this new Berejiklian Coalition Government renewable  energy scheme, because as renters they have no real security of tenure and would be permanently foregoing a $285 annual  low income household rebate with no hope of recouping the initial $3,500 solar panel installation cost when their landlords refuse to renew the lease or sell the property.

Indeed, I rather suspect that like other home solar power incentive schemes certain categories of renters would be ineligible to even apply.

Energy NSW, 28 September 2018:

The NSW Government has announced $15 million in clean energy funding for a new solar program aimed at saving low-income households hundreds of dollars each year on their power bills.

Acting Secretary of the Department of Planning and Environment, Dr Liz Develin said up to 3,400 households are expected to take part in the voluntary program which will see homes receive 2.5 kilowatt solar power systems if they forgo their Low Income Household Rebate.

The trial scheme will be rolled out in five selected State regions that will maximise the benefit of solar for local households.  The regions are: Sydney – South, Central Coast, North Coast, Illawarra – Shoalhaven and South Coast.

“The bill savings from the rooftop solar trial are expected to be close to double the value of existing rebate savings with an average bill reduction of $600 per household per year. This means that households who choose to participate in the program could be around $300 better off each year,” Dr Develin said.

“The program is entirely voluntary and eligible recipients will be able to reap the benefits of the program by transferring off the rebate program in return for a rooftop solar system.

“We know energy bills are placing pressure on low-income consumers, so we must ensure that we are doing everything we can to offer support for struggling households.”

The latest round of clean energy funding has now seen a direct injection of over $170 million into providing energy bill relief for households and businesses, including in regional NSW.

For more information about the solar program go to: www.energy.nsw.gov.au

Let's talk about Australian Prime Minister Scott Morrison's inability to face the truth about renewable energy

This was then Australian Treasurer Scott Morrison in late July 2017 on the subject of the Tesla battery planned to be used as part of the power grid in South Australia.

"By all means have the world's biggest battery, have the world's biggest banana, have the world's biggest prawn like we have on the roadside around the country...30,000 SA households could not get through watching one episode of Australia's Ninja Warrior with this big battery. So let's not pretend it is a solution."

Now when Morrison was mocking the South Australia government of the day he knew full well that the Tesla battery was never intended to supply energy in the same manner as a coal-fired power station – it was always intended to boost supply to keep energy flow from dropping below 49.2Hz and therefore minimise load shedding/brownout events. Media had discussed the issue in some detail.

Tesla boss Elon Musk built the battery facility within 100 days and the 100-megawatt lithium ion battery was switched on late last year to provide reserve capacity from renewable energy for the state’s electricity network.

According to the Australian Energy Market Operator (AEMO) executive general manager of operations Damien Sanford; "Its ability to respond very, very quickly to the different types of conditions that we see on the power system has been very encouraging for us". 

He told ABC News in October 2018 that; AEMO's data shows that it can dispatch power far more rapidly and precisely than conventional thermal power stations and more swiftly and accurately than the market operator thought possible — while also pushing down prices.

"We've been pleasantly surprised and would encourage more of this technology into the grid," Mr Sanford said.

ABC News also reported that; In the first quarter of this year, the cost of FCAS [Frequency Control Ancillary Services] fell by nearly $33 million, or 57 per cent, according to AEMO — in large part because of the introduction of the Tesla big battery.

The Tesla battery proved it worth in September 2018 when South Australia was isolated from the main grid by a lightening strike explosion in another state but despite this situation Morrison's 30,000 televisions were unaffected.

Once more a Coalition federal government is promising savings on household electricity bills

“Throughout the 1980s, '90s, and most of the 2000s, electricity prices tracked fairly closely to general consumer price trends. In the past decade, however, electricity has shot off the charts. Since 2008 power prices have risen 117 per cent, more than four times the average price increase across sectors.” [ABC News, 18 July  2018]

All three major NSW political parties - Liberal, Nationals and Labor - along with their federal counterparts drank the Kool-Aid when it came to the alleged desirability of privatising state assets in the electricity and gas sectors of energy supply.

Here is a brief outline of the how and why...... 

DECEMBER 2010

THE NSW [Keneally Labor] government has sold a giant slab of the state's electricity assets for $5.3 billion, completing a late-night deal with power generators that the opposition says secures only half of what the assets are worth and experts say will mean higher electricity bills…..

"The completion of this first tranche of the energy reform process meets the government's objectives – we have exited electricity retailing, we have created a competitive market structure approved by the ACCC and we have received a strong financial return for the taxpayers of NSW,” he [NSW Treasurer] said…..

Earlier, the shadow treasurer, Mike Baird, said: "Whatever they finally announce, it is clear from the ongoing speculation that the receipts will be at the lower end of the $5 billion to $7 billion range, which is about half what these assets are worth – and that is before you take off the $2.3 billion in inducements for the new coalmine needed to get the deal away.

'The end result is billions of dollars lost forever."

A UBS analyst, David Leitch, said: "NSW households are in for higher electricity tariffs and more people at their front door, trying to get them to change electricity supplier."

NOVEMBER 2013

After a three-year campaign to scrap the carbon tax, Prime Minister Tony Abbott has wasted no time in preparing legislation for its final destruction. He's demanding that the Senate pass it by Christmas….

"When this bill is passed, this Government estimates that power prices will go down by 9 per cent, gas prices will go down by 7 per cent, and that means that the average power bill will be $200 a year lower and the average gas bill will be $70 a year lower," Mr Abbott said on October 15.

JUNE 2014

In May 2014, the NSW [Baird Coaltion] Government signed up to the Council of Australian Governments (COAG) National Partnership Agreement on Asset Recycling (the Asset Recycling Initiative). Under the Initiative, the Commonwealth provides incentive payments equal to 15 per cent of the sale or lease proceeds that are reinvested in new infrastructure….

As of 12 May 2017, two government assets have been privatised in 2017. The most recent privatisation is the 99-year lease of a 50.4% share of Endeavour Energy. On 11 May 2017, the NSW [Berejiklian Coalition] Government announced that a consortium led by Macquarie Group's infrastructure arm had been successful in securing the tender for a price of $7.6 billion. Along with Ausgrid and Transgrid, the lease of Endeavour Energy represents the final of the three “poles and wires” sales – a key policy of the Liberal/National government in the 2015 State election. Announcing the sale, NSW Treasury stated:

The NSW Government will retain a 49.6 per cent interest in Endeavour Energy and will have ongoing influence over operations as lessor, licensor and as safety and reliability regulator.

June 2017

Two decades ago Australia embarked on an experiment with the privatising, corporatising and marketization of the electricity sector. The proponents at the time assured the nation that everything would be better…..

Electricity is now management heavy with a blow out in the number of managers relative to other workers. In addition electricity now employs an army of sales and marketing and other workers who do not actually make electricity. In addition the reforms seemed to encourage profit gauging on the part of companies in the industry who are able to inflate the asset base used in calculating the permitted return on assets. More than half the asset base appears to be ‘goodwill’ and retained earnings. There is a weird circular process in which high rates of return are capitalised in ‘goodwill’ and other fictitious or notional items while high profits guarantee high retained earnings which also feed into the asset base. In that way the unproductive capital base is allowed to increase and we are charged for capital that has no real function in producing electricity….

A host of factors have been blamed for the increase in electricity prices relative to other prices but we would point out that the main departure from the rest of the price index happened post privatisation and corporatisation.

JULY 2017

POWER prices are set to rocket after three major retailers announced increases of up to 20 per cent and $600 a year for the average customer in some states.

Origin, EnergyAustralia and AGL have all announced price increases for electricity and gas starting from July 1….

In NSW, residential EnergyAustralia customers will see electricity prices increase by up to 19.6 per cent. Origin Energy customers will get a 16.1 per cent rise.

DECEMBER 2017

Key [Australian Energy Market Commission] findings for New South Wales.

The key supply chain cost components examined in the report include wholesale electricity purchase costs, regulated network costs and environmental policy costs.

Annual electricity prices for the representative consumer on a market offer in New South Wales:

* increased by 10.2 per cent from 2016-17 to 2017-18 due to higher wholesale electricity costs, driven by the retirement of Northern and Hazelwood generators and increasing gas prices

* are expected to decrease by an annual average of 6.6 per cent in 2018-19 and 2019-20. The expected decreases are largely attributable to decreases in wholesale electricity costs driven by expected new generation (approximately 4,100 MW across the NEM) and the return to service of the Swanbank E generator (385 MW in Queensland). In addition, in NSW, regulated network costs are uncertain in the two years to June 2020 due to the AER being required to remake revenue determinations for the NSW distribution network providers for the 2014-19 regulatory control period.

JANUARY 2018

Electricity prices have jumped by six times the rate of the average pay rise, new figures reveal, as family wallets are increasingly squeezed by essential services such as education, utilities and fuel….

The most significant price rises were electricity, up 12.4 per cent, fuel up 10.4 per cent, domestic holiday travel up 6.3 per cent and fruit up 9.3 per cent. 

Across New South Wales, we found theaverage annual electricity bill to be just over $1,667. However, we found that bill-payers aged in their 40s reported the highest average bills in NSW at $1,911.76. Those aged 70 or over reported the lowest average bills at $1,466.40.

JULY 2018

Late last year, the government released independent modelling forecasting the average annual household bill would be $400 a year lower from 2020 onwards, based on 2017 prices.

This was comprised of $120 due to the [national energy] guarantee and $280 due to new investment in renewable energy that was already planned, mainly because of the Renewable Energy Target, which will run to 2030….

The ESB [Energy Security Board**] proposal increases the annual average saving to $550 on 2018 prices, of which $150 is due to the guarantee and $400 due to renewable energy.

AUGUST 2018

The Turnbull Government says the NEG* will save the average Australian household $550 a year on their power bill.

After reading the National Energy Guarantee Consultation Paper as well as the 1 August 2018 Final Detailed Design and listening to statements made by the Turnbull Government, I personally find it hard to believe this change in federal government policy will significantly limit the rate of increases to household energy costs over time when this is based on an assumption that the market will respond by lowering prices across the Australian wholesale and retail sectors of energy supply.

Talk of money 'saved' by households is illusory as It will certainly see no reduction in the actual amounts listed on 2019-20 household electricity and gas bills once this guarantee comes into effect.

*KPMG Economics, November 2017, NEG and Electricity Pricing

Network charges represent on average about half of the electricity supply chain costs, with generation and retail costs (combined into the ‘competitive market’ category) accounting for 42%, and environment policies adding the remaining 8%, based on the latest AEMC Electricity Price Trend report.

The make up of the total average retail cost is shown in Chart 6 which reveals the single largest component of the price of electricity is distribution costs, which represented about 40% of the average cost of electricity. Over the AEMC forecast period to 2018/19, these costs are still expected to represent by far the largest component of the electricity cost stack, albeit fractionally lower in a couple of years’ time.

The next largest component is the wholesale price of electricity, which in 2015/16 represented about 28%. Under the AEMC Base Case scenario – which includes the retirement of the brown coal fired Hazelwood Power station in Victoria – this cost component had been anticipated to rise steadily over the forecast period to represent about 30% of the cost of electricity by 2018/19.

As shown in Chart 7 below, these three jurisdictions experienced higher than anticipated wholesale electricity costs in the order of between 30% and 80% when compared to original forecasts for FY2016/17. When considered on a weighted average basis, using the same methodology applied by the AEMC to estimate the values for the National Summary, wholesale electricity costs have therefore been about 17% to 20% higher than anticipated.

This increase in wholesale electricity costs pushed the bundled cost of electricity to rise by about 5% higher than anticipated by the AEMC, and shifted the relative importance of wholesale prices in the cost stack from about 28% to 31%.

** Energy.gov.au, A Better Energy Future for Australia

Formed out of the Independent Review into the Future Security of the National Electricity Market (the Finkel Review), the Energy Security Board comprises an independent chair and deputy chair along with the expert heads of the Australian Energy Market Commission (AEMC), the Australian Energy Regulator (AER) and the Australian Energy Market Operator (AEMO).

The current Board membership is Chair Dr Kerry Schott AO,  Deputy Chair Clare Savage, Australian Energy Market Commission Chair John Pierce, Australian Energy Market Operator Chief Executive Audrey Zibelman, and the Chair of the Australian Energy Regulator Paula Conboy.