The Electricity Industry’s Death Spiral

8 07 2014

Over the past seven or so years, our electricity costs have more than doubled.  While the media has feasted on the pink batts, Peter Slipper and Craig Thomson fiascos, the astonishing reasons behind these price cost has been largely ignored, even though they may well turn out to be one of the greatest scams in the history of Australia.

Since 2009, the electricity network companies that own and maintain our “poles and wires” have spent an astonishing $45 billion on what will turn out to be the most expensive project Australia has ever seen.  Allowed to run virtually unchecked (now they have been mostly privatised..), all that money was spent on infrastructure we don’t need, and we’re all paying for it with ‘connection fees’.  The spending was approved by the federal regulator, but the federal government didn’t even realise what was going on until it was well underway and too late to stop it……….


Make no mistake…… this is the single biggest reason electricity prices have skyrocketed.  The federal treasury tells us that 51% of your electricity bill goes towards “network charges”.  The carbon price, despite unending propaganda to the contrary, is peanuts, comprising just 9% of the price rise….. NOT 9% of the entire bill as is often touted!  The rest of your bill is carved up between those companies that actually generate your electricity (20%) and the retailers who package it up and sell it to you (20%). How one packages electricity I’ll never know, but if there’s a buck in it…….. The RET (Renewable Energy Target) is such a small  impost, the treasury’s analysis doesn’t even include it; the Australian Energy Market Commission says it may be around 5%.

Thanks to the network companies’ infrastructure binge, we now pay the highest prices in the developed world. In the US, electricity costs just 13 cents per unit (kWh), less than half what we are charged, now the cost has gone up another 17%….  The impact has been felt most in New South Wales and Queensland, where the networks are government owned and network charges have accounted for two thirds of the price increases.

For a Coalition intent on destroying the carbon price, the price hikes were a gift from heaven – absolute “proof” that the carbon price is as destructive to the economy as they predicted.  Chris Dunstan, of the Institute for Sustainable Futures, believes that the networks’ spending spree may actually be the reason for the mad monk’s success.  “If electricity prices hadn’t doubled,” he says, “the carbon tax would not have been anything like the issue it was”……  and maybe the fiberals would not have won the election.

But wait……..  it gets worse.

In Climate Spectator, Tristan Edis writes “Private sector businesses have either acquired or constructed over 20,000 megawatts of fossil-fuelled power plant capacity since after 2007, when the Labor Party committed to substantially expand the Renewable Energy Target. This represents the vast majority of fossil fuel power plant capacity owned by the private sector in the National Electricity Market.”

Why does this matter?

“Well, just about every respected Australian energy market economic modeller estimates that repealing the Renewable Energy Target would probably end up costing them money through higher bills. Instead the main beneficiary of a wind back in the legislated target will be the existing owners of fossil fuel power stations.  According to analysis prepared by Hugh Bannister of Intelligent Energy Systems, abolishing the RET would deliver a $12.8 billion windfall to fossil fuel generators over the next 10 years in net present value terms, but cost consumers $500 million and renewable energy generators $7.7 billion.” writes Tristan.  The solution?  A $30 billion government bail-out for power companies……..  I would call that a cock up of epic proportions.

Investment bank Morgan Stanley says it has been overwhelmed by the response to its recent analysis which suggested that the falling costs of both solar modules and battery storage presented a potential tipping point that would encourage huge numbers of homeowners and businesses in the US to go off grid.  If that’s the case in the US, how much stronger is this case here in Australia where power costs twice as much?

Australia will be one of the proving grounds for the world’s second largest solar energy company to test its off-grid solar energy storage, putting solar panels and lithium-ion batteries into customers’ homes in Victoria. SunPower is expected to make an official announcement on a pilot project in Australia’s second most populous state in the next two months.

And now, the Tasmanian Economic Regulator has dropped the feed-in tariff (FiT) for solar customers who signed up after 30 August 2013 from 8.282c to a paltry 5.551c effective from 1 July 2014.  Read all about that here…. and see the comments where everyone is talking about disconnecting from the grid, and town sized mini smart grids with storage.

And hot off the press, we now have this from the ABC….

The Australian Solar Council has criticised moves by Ergon and Energex to encourage new customers to install smaller solar systems that do not feed electricity back into the power grid.  Ergon and Energex said the changes, which included new rules about installing systems that feed-in power, would help them manage the detrimental impact of solar on their power networks.

John Grimes from the Australian Solar Council said he believed the power companies were trying to limit solar uptake.  “There’s a very small number of instances where there are technical issues caused by solar uptake, but they are a tiny fraction of a per cent,” Mr Grimes said.


Price of solar has come down, but not batteries: installer

Solar installer Brian Cooke specialises in systems that allow households to generate all their own electricity.

He said poor battery technology was limiting the ability of people to go “off the grid”.

“The price of solar has come down dramatically but the other associated cost of batteries, which is the other major cost, is not really coming down,” Mr Cooke said.

However that has not stopped the growth in people looking to become self-sufficient.

That the idiots in charge may have started their own demise with a revolution of their own making is undeniable.  This revolution, however, still demands a working economy and resource availability, neither of which I can see lasting much after 2020.

How a small town could go off the grid

The collapse of the electricity distribution system may well have already started.  Slowly perhaps, but the death spiral, as it is known, is underway.  People I know in the solar industry are saying the next wave of business opportunities for them is disconnecting grid tied people who (unlike us) are going to lose the FiT they were expecting to pay for their investment in PVs, and installing battery storage, running their houses as stand alone systems.  Our plan is definitely to not connect to Tasmania’s grid when we move.  One thing is certain about the future……  it’s really really uncertain!




One response

10 07 2014
Terry J Wall (@terryjw7)

Well done Mike. I just cannot wait to buy my retirement home and it is going OFF GRID as about number one priority. Must be about time set up a citizens fund to take these bastards to the International Court of Justice with the claim that they knowingly fleeced thousands of citizens at the very time when common sense that grid supplied power was on its death bed. Abbott can be the defendant as he was in charge at the time when the penny was dropping.

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