Day 254: 'Avoid that trap'
An introductory weekday newsletter from Schwartz Media. Counting the days since Australia had an energy policy.
Good morning and welcome to day 254.
Today in summary: the AER releases its final determination on the default market offer price; Labor announces its Solar Schools plan; and network pricing is set for the next five years in NSW, Tasmania, NT and ACT.
— Sophie
Today’s policy spin level: 💨💨💨💨
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The Australian Energy Regulator this morning released its final determination on the default market offer for NSW, South-Eastern Queensland and South Australia, setting the DMO price at the midpoint between the median market offer and median standing offer in each state. That’s the same as the draft determination the AER released in February. It says this will reduce annual power bills for residential customers in NSW by up to A$181, those in south-eastern Queensland by A$118, and South Australia by A$171. Remaining states, territories and most of Queensland have their own regulations for power pricing.
Energy Minister Angus Taylor said in a press release this morning that the DMO would:
“cap prices for standing offers, acting as a price safety net for those who find pricing and discounts confusing, or who simply don’t have time to negotiate.
The DMO figure will also act as a reference price for all other small business and residential customers, requiring energy retailers to advertise their standing and market offers against a common price benchmark.”
Labor has today announced schools could become ‘virtual power plants’ through the installation of solar panels, funded via up to A$1 billion in loans from the government’s Clean Energy Finance Corporation, the SMH and AFR report. The Solar Schools scheme will begin with a trial involving two to three VPPs in different regions, both report. Labor announced A$10 billion more for the CEFC over five years last year, and in a press release this morning Labor leader Bill Shorten said the financing would come from the “expanded Clean Energy Finance Corporation capital”. The press release says:
“Labor will allow industry and schools to develop different VPP models, fostering competition and innovation in VPP design and delivery. VPP developers will have the flexibility to choose their equipment suppliers, aggregation services providers, retail partnership and customer offerings. This provides choice for school systems and encourages a competitive market to provide the best portfolio of VPP offers to customers.”
The AER also released a number of other decisions on network pricing for electricity distribution companies in Tasmania, NSW, ACT and NT from 2019 to 2024. The regulator has cut the amount recoverable by NT’s Power and Water by 18.5% from the previous period, which it estimates will reduce residential customer bills by 4.1% by 2024; in NSW, it estimates changes to recoverable network tariffs will lower charges for customers on Ausgrid and Endeavour’s networks, but lift them for customers on Essential’s network.
In the ACT, Evoenergy will be allowed to recover 9% more from customers than it was in the previous five year period, lifting residential customer bills 2.5%; and Tasmanian residential bills will rise 3% over the next four years.
The Commentariat
In the AFR, former economics editor Alan Mitchell writes that Julia Gillard’s emissions trading scheme was a good option for reducing the cost of emissions reduction, and could help both Labor and the Coalition.
“The cost of cutting emissions may be entirely worthwhile but hiding it from voters is asking for the kind of rejection that was suffered by Gillard and her emissions trading scheme in 2013.
An emissions trading scheme helps the politicians avoid that trap because the cost of emissions reduction is reflected in the price of the permits. If cutting greenhouse gas emissions really was as costless as politicians and renewable energy advocates pretend, no one would pay for the emissions permits; they would switch to renewable energy or wave some other magic wand to cut their emissions.”
Three more things
The AFR reports that large companies are already factoring in the cost of carbon to their business models and investment decisions, in the continued absence of direction from the federal government. The companies are using ‘shadow’ carbon pricing between A$12.50 per tonne and A$140 per tonne to stress-test their businesses, the AFR reports, as they come under increased pressure from investors and regulators to assess the potential impacts of climate change.
Mick McCormack, the outgoing chief executive of APA Group - which owns Australia’s gas pipelines - says Australia needs “greater certainty and bipartisanship” on energy policy and the country has an “enormous opportunity” to adapt current infrastructure to support new fuels like hydrogen and biogas, the SMH reports.
Small businesses care more about being paid on time and company tax cuts than about energy policy according to a survey of 1000 businesses by MYOB, the SMH reports. Three-quarters of those surveyed expect a change in government following the election, it says.