Cheap versus clean shifts to cheap versus reliable

Last decade the energy debate was about cheap versus clean. Clean is now the cheapest, and so the debate is now shifting to cheap versus reliable, AGL Energy Chief Customer Officer, Melissa Reynolds said at CEDA Queensland’s 2018 Energy series event.

“A decade ago when demand was rising, coal powered stations may have looked like an economic investment, given the costs at the time and the projections of market conditions in the future,” Ms Reynolds said.

“But this is no longer true, demand in the NEM is much lower than was forecast a decade ago.

“Solar panels are 10 times cheaper than they were 10 years ago.

“Advancements in wind generation mean that wind, firmed up with gas, now provides generation more cheaply than any other new build.

“These changes were unprecedented, we cannot move into the future with the economics of the past.”

Ms Reynolds said energy policy needs to be flexible and resilient but also focussed on the longer-term imperatives to avoid huge costs being sunk into projects that don’t provide benefit over time.

“Over the past 10 years AGL has spent almost $8 billion on both new generation and in improving the reliability of our existing fleet,” she said.

“Over the same time 20,000 megawatts of new generation has entered the market.

“Our customers are telling us that they support a shift towards lost cost, low carbon energy.

“However, with increasing amounts of renewable generation, reliability has become a greater focus of attention, as we need to ensure that there is enough generation to meet demand when the wind is not blowing, and the sun is not shining.

“The large-scale investment to replace ageing assets therefore requires certainty, not only on how Australia will meet its emission reduction commitments but also some certainty on how system reliability will be maintained by ensuring enough firm generation remains in the market.”

Ms Reynolds said as we look to how to solve these problems in the future it is critical that customers’ needs remain at the forefront of decisions.

“If the solutions that we propose as a business do not suit our customers, they will demand change,” she said.

“If the policies of our government do not support businesses, they will leave our shores.

“And if our actions do not meet the expectations of our communities, we will lose our social licence to operate.”

Alinta Energy Executive Director Retail Markets, Jim Galvin said Australia has had a decade of poor policy outcomes and short-sighted political debate.

“How do we address the dysfunction that has delivered us a new energy policy acronym every 24 months, and just when we’ve learned what the acronym stands for, resulted in the Prime Minister of the day being spectacularly punted off the playing field?” he said.

“Unfortunately, it is the customers that have ultimately paid the price for this dysfunction.

“At least a decade ago as an industry participant, the debate was exciting, because at least in the beginning there were more possibilities on the table and over time with the death of each idea, possibilities have narrowed and narrowed, and the debate has coarsened.

“The most dangerous thing about the situation today is that we’re becoming desensitised to it all.
“And we’re in danger of lurching along and maintaining the status quo.”

Mr Galvin said Alinta supports the ACCC’s recommendations saying it will help to win back some trust and improve things for customers.

“We need to take a range of issues off the table which will increase the focus on higher value reforms and improve our ability to advocate for the removal of subsidies and the correction of network costs on behalf of our customers,” he said.

“Yesterday the Energy Minister announced the Government’s intention to pursue these recommendations with COAG, which is due to meet again this week and then again in December.

“Our message to participants, with apologies to Nike, is just do it.

“Something is better than nothing, on the proviso that it’s consistently endorsed by all of the states.

“We support a reference price to give our customers transparency on how their current offer compares to market.

“We will reshape our portfolio, to advertise our best unconditional offers in dollar terms rather than percentages.

“And we’ll work with the appropriate authority to enhance the safety net on standing offers.”

Mr Galvin said in order to unlock even more affordable energy in Australia, we’re going to need the stability and certainty that the NEG represented.

“We need competition to be encouraged, in both wholesale and retail markets,” he said.

“The mistakes, subsidies and overspends of the past need to be unwound.

“And we require a laser-like focus on the impact of regulation on affordability.

“None of that is going to be achievable without political and regulatory solutions.

“So instead of reaching into the scrabble bag of letters for our next energy policy acronym, let’s start by getting some quick wins for customers and then refocus the debate on what we can achieve.”

Event presentations

Jim Galvin, Alinta Energy MP3 | PDF

Melissa Reynolds, AGL Energy MP3

Panel discussion MP3