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Rod Boyte speaks with Energy Source and Distribution magazine on the potential demise of the NEM

Our GM of Australia, Rod Boyte, gives a stern warning about the demise of the NEM.

Australia’s National Electricity Market (NEM), which has served the eastern and southern states for 20 years, may be heading towards its demise.

The NEM framework has operated well over this time, but with a shift to renewables it’s increasing doubtful that the NEM is an appropriate system for the future of electricity in this country.

NEM’s current objective is “to promote efficient investment in, and efficient use of, electricity services for the long-term interests of consumers”.

Read the full article: Energy expert predicts possible demise of the NEM.

 Energy Source & Distribution

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A Higher Emissions Target will Cost More

Even before the National Energy Guarantee (NEG) gets signed off we are already seeing debate around whether a higher emissions target will increase the price of power or not. Some are saying that the price of power would be lower with a higher emissions target. It is difficult to see the logic in their argument.

From a basic economics perspective you shouldn’t need an emissions target at all if the more renewables you add, the more prices reduce. The renewables will be built without any incentive to do so. This may still happen if renewables continue to drop in price, but it hasn’t reached that point yet. Yes renewables are cheaper (excluding reliability issues) than new thermal power stations, but they still are not cheap enough to displace existing thermal generators.

This is why we still need an emissions target – because we want to achieve greater emission reductions than what we would get without the target. But let’s not pretend it will be for free or that it will save us money.

An analogy I use is with Electric Vehicles (EVs). Imagine if they were cheaper than conventional petrol / diesel vehicles and we could power them from renewable energy. Would we all suddenly convert from our “old” vehicle? Probably not – because many of us may have only just bought the “old” car and expect to get many years use out of it before we would upgrade to a new EV.

From a Government perspective how would they encourage us to convert? They could subsidise EVs. Or put a tax on petrol. Or ban the “old” vehicles. Whatever they did would be something that would be less than economically ideal, but would fast-track the substitution. There would be a cost that someone would have to pay for the environmental benefit we wanted to achieve. This is what they are doing with an emissions target.

So there will be a cost, but how much will it be? And what are we prepared to pay as consumers / voters?

This is where it gets tricky as I have little confidence in models that are supposed to inform us of where electricity prices are likely to go and the impact that varying the emission targets will have. Trying to pick future energy prices has only one outcome – you are going to be wrong!

So my dilemma is that as an environmentalist I am wanting to see us move as quickly as possible to reduce emissions, however as an engineer working in the energy sector I am aware that to do so will result in increased costs that are uncertain, and that, in the extreme, may result in demand destruction (business closures) and reduced energy affordability.

I don’t have faith in the electricity price modelling provided by the “experts” and therefore I don’t have confidence in clarifying the cost / benefit trade-offs of any emissions target whether it be 26% or 50% or anything in between. If I am confused how must the typical consumer with little industry knowledge feel?

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Presenting on “Internalising Energy” at VicWater’s Future State of Efficiencies Conference

Last week our Australian GM, Rod Boyte, presented to an audience of Directors and senior managers of Victorian Water Corporations on the increasing importance of energy due to sweeping environmental, social, and business trends, including:

  • climate change and global carbon regulation,
  • increasing pressure on natural resources,
  • rising expectations about corporate environmental performance,
  • innovations in energy technologies and business models, and
  • plummeting renewable energy prices.

These global megatrends are pushing energy up the corporate agenda meaning that it is no longer sufficient to just think of energy as a procurement issue.

Rod outlined 5 steps he recommends for building a robust energy strategy and for internalising energy; and provided examples of organisations who are following these steps as an opportunity to create value in their businesses.

Contact our Melbourne office if you would like further insight into the work we are doing in this area.

 

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The Catch 22 of Australia’s Future Electricity Pricing

Light Globe

Most of the electricity debate in recent times has been about security of supply; will the power be available when you want to switch on your air conditioning during a 40 degree day this summer, and subsequent summers? While it’s a good conversation to have (more…)

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The Australian Electricity Conundrum

Today we are transitioning to a renewable tomorrow. Renewables, largely being wind and solar, generate when nature provides the source of the power, not when people want it to be there. So unless we have storage (and lots of it) we will not have the power available (more…)

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Dr Finkel’s Review of the Security of the National Electricity Market at the Energy Futures Seminar

Smart Power attended this highly informative seminar last night sponsored by the Melbourne Energy Institute and The Grattan Institute.

Dr Alan Finkel provided an overview of the Review while Audrey Zibelman (more…)

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Rod Boyte Presents at the 2017 Future State of Electricity Conference

This visionary event organised by VicWater – the peak industry association for water corporations in Victoria – brought together leaders from the new and traditional energy industry to provide their thoughts as to where the electricity industry is heading and how this might impact on the Water industry. (more…)

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Australian Energy Climate Change Policy Impacts

At the start of a new year it is timely to look back over the last couple of years and view how energy policy has impacted on energy pricing, and how it might change going forward. (more…)

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