Followers of this column will be familiar with my ongoing view that we are paying too high a price, socially and financially, for energy. South Australians pay the highest prices in the world for an unreliable system and Queenslanders are not far behind – although our systems are more robust. There is no choice here when it comes to our power, unless of course we go off grid. We have to deal with Ergon, so the government de facto calls the shots.
Like all national market mechanisms there are flaws, particularly where we see wholesale electricity traded like commodities on a stock market. The retailers then compete in the National Energy Market, an energy exchange spanning five states, where you find hundreds of traders who work for retailers glued to computer screens crunching the numbers to get the best deal. The generators who own power stations, sell their energy on the spot market to retailers using the same mechanism. That is a simplified explanation of the market. It is then distributed north.
There are two components to your bill. The generating end and the delivery end and both continue a merry uphill dance that now threatens our community fabric as well as the ongoing viability of businesses and consequently employment. The further you are away from the generators the more dramatic the effects. Much is being said about this, but up until now it has been ignored. Recent business and community surveys puts this as the top of the list of priorities.
To cut to the chase, Governments need to recognise that prices need to come down and they need to intervene to stabilise the grid and provide certainty around a realistic RET that allows the construction of high efficiency and low emission (HELE) coal power stations alongside with gas fired stations to provide for our base load demand. Closer to home we also need to dust off the cobwebs of the Tully Millstream hydro project to allow us additional flexibility whilst the rollout of standalone renewable energy projects with feed in provisions continues. The continuation of the current State Government policy of 50% renewable energy by 2030 is, frankly, unachievable and will most likely result in further business closures and continuing community cost of living pressures. They will continue to throw good money after bad as we become increasingly angry. There is a limit as to how long you can prosecute this policy folly which is bereft of logic. Of course this means a full blown debate around the true cost and reliability of renewable versus fossil fuel energy sources, but that is a debate we must have. It was instructive to listen to Matt Howell, CEO Tomago Aluminium whose smelter outside Newcastle consumes between 10 and 12% of all NSW energy production. Manufacturers are big consumers of base load power. In an answer to Matt Wordsworth of the ABC in a wide ranging interview, he said that the largest battery in the world currently would power the furnaces at Newcastle for just 8 minutes. Think about that.
The current community debate around energy policy is framed against the backdrop of the renewable zealots in one corner and the pragmatists in the other. The Finkel report gave us an insight into the intricacies of the debate. Governments cannot walk away from the base load power generation issue and “allow the markets to take care of it”. They can’t and they won’t. Governments have either got to participate in the market, or they have to protect the viability of the market. There are no ifs or buts here. Their very political lives will depend on it as will very many other lives in the months and years ahead.