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an energy death spiral? « Previous | |Next »
March 25, 2013

Giles Parkinson in his Energy death spiral – consume more, or prices will rise at Renew Economy highlights what is likely to happen in the rigged energy market in the near future. It also gives us an indication of the conflict around solar politics that will emerge.

Parkinson says with respect to the grid that:

Some $40 billion have been spent and the network operators want their money back, plus the regulated return on their investment that is decided by market regulators. And they will get it.That means that if consumers reduce demand – as they have so dramatically in the last couple of years – they will be hit by higher charges. The cause of this Catch 22 is because total revenues for network operators are set for five years. The recent surge in network investment – which has underpinned the majority of the recent dramatic price rises, but much of which has been criticized as “gold plating” – guarantee a certain return for the network operators.

The energy market is rigged in favour of the fossil fuel industry.

What this indicates Parkinson suggests, is an attempt by the Australian Energy Market Commission (AEMC) to justify the extensive network investment it ushered through to support an inefficient energy system; a system that uses less than 10 per cent of the original energy burned at its end point – and yet which is lauded as being cheap and efficient.

It's a death spiral in that it signals what happens when too many people reduce demand, or even leave the grid – leaving network owners with a redundant system. So the utilities are fighting against energy efficiency schemes, and against the proliferation of solar PV because these reduce demand for electricity produced by the fossil fuel industry. They are also proposing to to make it less attractive for customers to produce their own energy, consume less or even leave the grid buy increasing the fixed component of consumer bills---eg., the type of obligated payments that are in water supply.

The regulators, who have been captured by the industry are effectively protecting the billions of dollars in network investments in recent years, as are the state governments in NSW and Queensland who own their states fossil fuel industry. In contrast households are turning to solar PV because they see it as a good hedge against rising electricity prices. Hence we have the emerging solar politics.

| Posted by Gary Sauer-Thompson at 3:11 PM | | Comments (3)
Comments

Comments

I will bookmark this as another example of the free market ideology fallacy that stipulates that supply and demand control prices in a competitive [sic] market.
They don't, people do, or to be more exact the people who have political power in our so-called free market system.

That's neo-liberalism for you.

Maybe the falls in technology costs from rooftop solar and other micro generation means that consumers will soon have the option of disconnecting from the local utility ?

Australian utilities and generators have the power to protect their vested interests.They use fear and scare tactics and they have the implicit support of the pricing regulators-eg., Queensland.