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an archaic power grid « Previous | |Next »
June 24, 2012

The economic reality, as opposed to the negative rhetoric over carbon pollution pricing---those overblown forecasts of imminent ruin--- is that even with putting a carbon price on the current wholesale price still has it is lower than the wholesale price in 2009. Moreover, the wholesale price of electricity is declining due to reduced demand for electricity, and that the reduced demand for electricity is partly due to growth in solar PV and energy efficiency.

The negative rhetoric from The Australian is that Australia’s solar and clean energy industries are the cause for rising power prices. However, clean, green solar power, wind farms, or the one-off increase of the carbon tax, are not the main causes of rising electricity prices. The Australian Government’s draft Energy White Paper forecasts that governments will need to invest $100 billion (twice the cost of the National Broadband Network) to upgrade our electricity grid. It is this cost that is driving up power prices.

According to the Australian Energy Market Commission, electricity prices are likely to rise by over 30 per cent in the next couple of years. Network costs – the building of new power poles and wires – are expected to contribute more than 55 per cent of these costs. Increased distribution costs will mean a further 30% rise. Renewable energy schemes, including the Renewable Energy Target and State solar feed-in tariffs, are only expected to contribute 3 per cent to the cost increases, and the carbon pollution price around 10%.

The national electricity grid does need to be redesigned, rebuilt and enhanced. Redesigned because the current system of centralised and large-scale electricity provision is an historical artefact linked to reap the benefits of economies of scale and monopoly profits from a coal-fired technology. Redesigned because the techno-institutional complex of the national electricity grid is in large part designed to cope with a couple of very hot days each year.

John Grimes points out in Renew Economy:

one quarter of electricity costs come from just 40 hours of electricity consumption – those few days when it is so hot that everyone rushes home to turn on their air conditioning, or finds comfort in cool shopping centres. The proposed $100 billion investment in our power grid will reinforce this situation, and that fails the common sense test..Instead Governments and big power companies should be looking to reduce demand for electricity, thus lowering the $100 billion taxpayer bill and limiting electricity price rises.

So, whilst the cost of producing power is actually falling, Australian families are paying more for their electricity because our power grid is archaic and is not designed for the decentralised power system that is rapidly emerging.

It is relatively cheap and easy to produce power, but it is very expensive to transport electricity over hundreds of kilometres from coal-fired power stations to our big cities, and that cost is driving up power bills. Turning people’s houses and businesses into small power stations through the installation of solar panels is one way of helping resolve this problem of peak demand in hot days.

It is because solar and energy efficiency are starting to threaten the coal industry’s stranglehold on energy supply that there is a proliferation of negative rhetoric and the facts being distorted in the media.

| Posted by Gary Sauer-Thompson at 3:22 PM | | Comments (3)


"the negative rhetoric over carbon pollution pricing---those overblown forecasts of imminent ruin--- "

Some examples from Tony Abbott's fear campaign. My favourite is this one:

We had the AWU in South Australia just today predict that Whyalla and Port Pirie would be wiped off the map if the carbon tax goes ahead. But they're not the only major centres that would be wiped off the map if the carbon tax goes ahead.The carbon tax is a deadly threat to the economies of Gladstone, many centres in the Hunter Valley, in the Illawarra, to places like Portland in Victoria and to the Latrobe Valley, to places like Kwinana in Western Australia.'

Whyalla and Port Pirie in South Australia will be wiped off the map due to carbon pollution pricing.

It’s not the carbon price that is threatening the business models of the coal-fired power generators, it’s demand reduction that is killing them because the product they are selling is no longer wanted (or needed).

There is no case for new baseload before 2020. The utilities are finding it hard to move from a world where the overriding motive is simply to sell more power.

low wholesale electricity prices have not been reflected in retail costs because there is too much money being spent on upgrades and expansion of the grid – essentially the poles and wires.