Power bill pressures vs emissions vs reliability: Behind the new election battleground

Updated

Power bills are too high. You know it and so, now, do the politicians.

In the past decade, people are paying one third more than they used to in order to keep the lights on.

But even if bills did get cheaper, paying for energy is useless if the power goes down or climate change makes Australia inhospitable.

That's the conundrum facing politicians today, and so far they have been unable to do much about it.

Price versus emissions versus reliability.

It's brought down prime ministers, and now it's set to be at the heart of the 2019 election.

Getting past the power point When you plug in and turn on your television, it lights up because you have an arrangement with an energy retailer — one of those companies that send you letters asking you to join them. The ones with the call centres.

— one of those companies that send you letters asking you to join them. The ones with the call centres. The retailer itself needs to ensure it can supply you with enough power for your television. It usually doesn't generate electricity itself.

Instead, the retailer goes to the National Energy Market and buys it from a generator — companies that run the power plants, solar arrays and wind farms around the country.

How bills are made

The theory behind the energy market is that higher prices will trigger new investment, increasing competition and keeping prices in check.

That should mean your energy bill won't keep rising.

Put simply — it hasn't worked out that way.

Tightening of energy supply, brought about mainly by the exit of big coal-fired power-generation plants, has seen a general increase in wholesale energy prices, according to the Australian Competition and Consumer Commission (ACCC).

A report from Chief Scientist Alan Finkel found the closure of these coal plants at relatively short notice meant the market did not have time to respond adequately and replace their generation.

Plus, as the ACCC notes, generators, "had little incentive to invest in new capacity when they are reaping the benefits" of higher prices.

Over the past 10 years, Australians have opened their energy bills to see an increase of 35 per cent.

That would be even higher were it not for a general reduction in electricity use over this time.

Market watching

Rising network costs, environmental charges and retailer profits are the drivers of power bill increases, according to the ACCC, together with the volatility of the energy market.

A close look at the market shows on some days, the power price has skyrocketed.

Sorry, this video has expired Video: Angus Taylor on trying to get electricity bills down (7.30)

Dylan McConnell, a research fellow at Melbourne University's Climate and Energy College, highlighted the recent tension in the market by identifying one hot day in January which saw a "trip" at Loy Yang B, a coal plant in Victoria.

Although the energy market responded by bringing in more energy from interstate, the price of power spiked in little more than an hour as expensive gas generators were brought online to meet demand.

Mr McConnell also shared charts of energy generation of two extreme days in South Australia.

The first, from a week in January 2017, saw prices fall below zero due to plentiful wind. The second was from a week earlier this year where the wind almost stopped entirely, prompting a price spike.

The role of emissions

Climate change and its potential consequences have prompted a worldwide effort to reduce carbon emissions.

The Paris Agreement, made in 2015, involved about 200 countries agreeing to do what they can to limit the increase in global temperatures.

Tony Abbott's government signed up and pledged to reduce Australia's emissions by 26 per cent of 2005 levels by 2030.

The Government says we are on track, but others are not convinced.

What do carbon emissions have to do with the energy market?

Australia's electricity sector is the single largest contributor to the country's emissions — around one third of 2017's total.

Getting the Federal Government on the same page with state governments — which will invest and encourage projects they like — can be challenging.

However, the centralised oversight of the energy market and the volume of the sector's emissions means a few regulatory or market tweaks can have a massive impact.

Keeping the lights on

The South Australian blackout of 2016 shut down power for almost the entire state for hours.

It came at a time when the share of renewables in the state was being criticised.

Even while the power was down, opportunistic politicians such as Nick Xenophon laid the blame on the state's accelerated march towards renewables.

Yet the blackout was caused primarily by overly sensitive protection mechanisms in wind farms following transmission line damage.

The Australian Energy Market Operator (AEMO) found the changing generation mix had resulted in new technical challenges of keeping the grid online.

An increasing mix of coal, gas, wind, solar and batteries has forced politicians and regulators to address new threats to reliability.

What the NEM looks like The National Energy Market links generators in South Australia, Victoria, Tasmania, New South Wales and Queensland.









Summer is the time when the energy market is usually tested to its limits, when millions of Australians want air conditioners switched on during hot weather.

In preparation, AEMO releases a "summer readiness" plan.

This year's plan notes the threat to the network from bushfires, anticipated record demand, and not enough generation in Victoria as potential problems.

In response, AEMO has sought to find extra generation to meet capacity and to ensure the network continues to operate.

Energy Minister Angus Taylor said there was "a tough summer approaching".

Trilemma election

An intense policy process during 2017 and 2018 sought to bring together the three competing priorities: price, emissions and reliability.

It led to a proposal dubbed the National Energy Guarantee being discussed with states and even in the Liberal Party room in August.

However, government backbenchers refused to support the policy — despite it being developed by the expert independent Energy Security Board — meaning it was unlikely to pass Parliament.

The damaging process culminated in the downfall of Malcolm Turnbull, even after he chose to scrap the policy.

It recalled the downfalls of both Kevin Rudd and Julia Gillard, who were both undone at least partly by their responses to climate change.

Mr Taylor, appointed as Energy Minister by new Prime Minister Scott Morrison, has sought to focus the Government on reducing power prices.

Mr Taylor now wants the power to force electricity companies to provide default prices in a bid to drive down bills.

He also wants to prevent them shutting major generation sites to try to ensure enough energy supply.

These are significant interventions into business operations from a party that traditionally supported market-based responses.

He is also prepared to make it easier to provide coal-powered electricity by offering to underwrite projects of the Government's choosing.

It means the emissions component — covered in the National Energy Guarantee — has been deprioritised.

Towards the end of 2018, Labor unveiled its own policy.

If it wins the 2019 election, it will back the National Energy Guarantee developed under Malcolm Turnbull's Government, together with additional funding for renewable energy projects and more ambitious emission-reduction targets.

The announcement means the trilemma of prices, emissions and reliability — and the parties' different responses — will be a major point of difference in the election campaign.

Topics: government-and-politics, environment, energy, electricity-energy-and-utilities, emissions-trading, business-economics-and-finance, australia

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