Future of power uncertain and expensive
The Energy Market Regulator on Monday confirmed that households will pay up to an additional $280 a year for electricity.
The increase is because of higher prices in the wholesale market caused by lower-than-expected supplies of renewable energy and less reliability from a rapidly deteriorating coal-power fleet.
Households in NSW face the steepest increase, up to $280, while Queensland household electricity bills are projected to increase by as much as $77 and South Australia as much as $71.
Australian Energy Council chief executive Louisa Kinnear says price pressures will continue as a result of the energy transition, with the costs of the poles and wires as well as retail costs all contributing to price rises.
This follows confirmation by the Australian Energy Market Operator last week that the cost of building transmission lines had gone up by up to 55 per cent.
As a result, AEMO says it will investigate whether planned transmission projects that have not been committed are still financially worthwhile.
More attention will now be paid to how to use spare capacity from household rooftop solar systems and batteries, otherwise known as Consumer Energy Resources.
AEMO admits it is a big challenge.
While AEMO's 2024 system plan had a focus on five national market regions with about 300 bulk supply points, the 2026 system plan will for the first time consider low-voltage networks. This will involve more than 500,000 low-voltage transformer sites and the CER connected to more than nine million customers.
The feedback from power utilities has been informative.
In April, Transgrid said assumptions that Virtual Power Plants will experience the same level of availability and flexibility to respond to market conditions as an equivalently sized utility-scale battery energy storage system are not reasonable.
Households were unlikely to accept that their assets may be accessed frequently and run very hard because household solar and batteries are primarily investments intended to provide utility and value to consumers rather than the market, Transgrid said.
In March, Queensland power utilities Ergon Energy and Energex gave a similar warning.
'We are cautious of the approach to model customer behaviour based on economically rational models, as we consider most CER investments do not conform to these modelling outcomes,' the utilities said.
'For example, based on our anecdotal experience, AEMO's assumptions regarding the level of battery energy storage systems uptake supported by Virtual Power Plants may be overstated.'
In short, the costs of intermittent generation and distribution are rising.
The reliability of coal is declining. The costs of transmission lines risk becoming uneconomic. The industry is grappling with its social licence in rural and remote areas.
The alternative of taking power from rooftop solar and batteries fits with government plans – and industry hopes – for new household subsidies but has many challenges that are known and many yet to be
discovered.
The future is higher costs and less certainty. Graham Lloyd Environment Editor
Graham Lloyd has worked nationally and internationally for The Australian newspaper for more than 20 years. He has held various senior roles including night editor, environment editor, foreign correspondent, feature writer, chief editorial writer, bureau chief and deputy business editor. Graham has published a book on Australia's most extraordinary wild places and travelled extensively through Mexico, South America and South East Asia. He writes on energy and environmental politics and is a regular commentator on Sky News.
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