The year ahead in energy Some potential issues, uncertainties and priorities for the Australian National Electricity Market

Transcription

1 The year ahead in energy Some potential issues, uncertainties and priorities for the Australian National Electricity Market Iain MacGill Associate Professor, School of Electrical Engineering and Telecommunications Joint Director (Engineering), CEEM AIE Young Energy Professionals Sparke Helmore Lawyers, Sydney 18 March, 2013

2 Considering the year ahead in energy some options If history is your guide If trend is destiny If you follow forecasts If our aspirations set our future course If the politics is the key If processes plot the path If we should focus on key challenges and some key likely directions for

3 If history is your guide Energy supply infrastructure slow to build, long economic asset life therefore physical change takes time (BREE, 2012) (Productivity Commission, 2012) 3

4 History repeats? Trends away from underlying developments may be shortlived and will see reversion to mean given time Evident recent shift to gas and renewable generation in NEM might be slowed, stopped or even reversed Increasing gas prices with LNG exports Repeal of carbon pricing Reduction in Renewable Energy Target Moves to restrict deployment of residential PV 4

5 Historical energy policy objectives and priorities Also relatively consistent over time, jurisdiction AIE (World - YEP: Energy The year Council, ahead 2010) in energy 5

6 Accessibility: affordability is always key, hence prices matter and can change faster than physical infrastructure (ESAA, Submission to AEMC DSP Issues Paper, 2011) 6

7 If trend is destiny NEM investment has moved markedly to gas and wind (Australian Energy White Paper, 2012) 7

8 NEM generation trends starting to follow (Pitt&Sherry, 2013) 8

9 South Australia now a world leading wind jurisdiction wrt penetration levels (AER, State of the Energy Market, 2012) (AEMO, South Australia Study, 2011) 9

10 Apparent Merit Order Effects in SA & VIC from wind Wind clearly appears to be reducing wholesale spot prices though note complexities of such analysis wrt overall price impacts, particularly in the longer-term. (Forrest and MacGill, Energy Policy 2013) 10

11 However, key trends potentially demand-side Growth in distributed PV similar in scale to utility-scale investment (APVA, 2012) 11

12 Demand trends surprising to many stakeholders (Pitt&Sherry, 2013) 12

13 If following forecasts? Then take care eg demand forecast (AEMO ESOO, 2010) 13

14 Followed by 2011 demand forecast (AEMO ESOO, 2011) 14

15 Followed by 2012 demand forecast (AEMO ESOO, 2012) 15

16 Many other forecasts take your pick 16

17 Price increases locked in.. with more to come? Forecasts can drive changes that mitigates against those forecast changes a key role of forcasting (Productivity Commission, 2012) (AER, State of the Energy Market, 2012) 17

18 If policy aspirations set our course But not clear how possible conflicts between objectives might be prioritised (Australian Energy White Paper, 2012) 18

19 ..or, instead, focus on policy directions (Standing Committee on Energy and Resources (SCER), 2012) 19

20 If the politics is key then present uncertainties very high 20

21 If processes plot our path Key role of current actors; motivations & interactions Note that the Productivity Commission sees consumer groups as major institutional actors in policy process but not the current market incumbents including NSPs, retailers and generators: A surprising world view!? (Productivity Commission, 2012) 21

22 Recent / Current reviews (Productivity Commission, 2012) 22

23 Continued (Productivity Commission, 2012) 23

24 Focus on key challenges of climate change ( (Australian Energy White Paper, 2012) Elec Electricity industry planning and economics 24

25 Progress but nothing of the scale and coherence required to date here or internationally (Australian Climate Commission, 2012) 25

26 Growing interest in future high renewables electricity Many drivers including climate change (and given poor progress of other low carbon options) energy security (most countries see fossil fuel $ as economic liabilities) falling renewable technology costs, particularly PV systems $/Wp Some key questions (APVA, 2012) Technical feasibility? can high renewables mixes utilizing highly variable and somewhat unpredictable solar and wind reliably meet demand at all times and locations, what are the network implications? If yes, Economic feasibility? is high renewables economically worth doing given likely costs vs costs of inaction, other options and what do we do about uncertainty If yes, implementation feasibility? mkt arrangements, policies required? 26

27 High complexity, uncertainty technical, geopolitical, business, regulatory 27

28 On the agenda for 2013: Retail markets and network expenditure The unfinished business of electricity industry restructuring Current market selling the wrong product electricity kwh rather than the desired energy services of energy users homogenous, low engagement competition isn t really competition Don t actually have prices, instead tariffs (schedule of fees) traditionally charge schedule of fees sufficient to deliver essential current & future access to reliable electricity supply service s.t. underlying customer class costs, wider considerations (eg. equity). unresolved question for restructured electricity industries only limited moves towards economically efficient prices requiring major changes to interface b/n supply and demand sides of electricity industry and NSPs Little apparent interest or willingness to do this to date by key players Inevitably limits to the role of prices given electricity s wider societal objectives including accessibility, sustainability 28

29 Increasing prices are in part due to energy security and reliability standards, but unclear these represent preferences of those who pay clearly not economically efficient because Current market arrangements don t facilitate appropriate levels of demand-side participation and energy efficiency which are both essential to improve economic efficiency Network expenditure has evident gold plating, currently largely ignores non-network solutions in part welcome + overdue recognition of need to price greenhouse externalities through C price, renewable energy target At present, only partial removal of a long running subsidy to large high emission generators Future prices? depends on our choices on above and more 29

30 And ways forward Electricity industry trends not destiny but often default Many key opportunities going forward lie on the demand-side; energy efficiency, demand-side participation, distributed gen. However end-users have to be ready, willing and able to act Need support from Energy Service Companies (ESCOs) focussed on delivery of energy services - the missing institutional player in the NEM This should be key focus of future reform including Power of Choice More economically efficient retail, network prices can play useful role but inherently limited in addressing wider concerns Coherent and comprehensive policy, market and regulatory framework Network decision making better served by formal Integrated Resource Planning approach rather than current arrangements Greater transparency, stakeholder participation, separation of powers 30

31 The best way to predict the future is to invent it 31