Is the energy market facing more hardships?

Ross Greenwood speaks to Matthew Warren, CEO of the Australian Energy Council, about the National Energy Guarantee

Introduction: Is the energy market facing more hardships?

Ross Greenwood:  But there’s something else and that is, while you’ve had the same sex marriage issue go through our parliament and of course the vote take place. You’ve also had the whole issue in regards to the constitutional crisis and the citizenship of our federal politicians. What’s been left aside for the moment, at least anyway, is energy process. Now, quite clearly it is a more tangible impact on your life to most people than either of those other two issues.

Now, today the Turnbull government says it’s going to put more pressure on states and also the opposition to support it’s new national energy guarantees. You might be aware some states in particular Victoria and South Australia say they don’t want to see the number of renewables reduced in the energy system around their country. The government says, the federal government this is indicates it’s still fullfills the strategist commitment to cut emissions by 26% to 28% under the Paris climate deal while at the same time providing savings to households of $120 a year, ten bucks a month which is more than the original figure of $115.

Now, this comes at the same time that you’ve had a new report coming out in particular Victoria, looking at the levels of people who have really got some hardship and this coming out of the Victorian energy markets report yesterday. A record 80,000 customers took part in hardship programs. The data had escalated to an average, get this, $1,564 before they were helped. Retailers disconnected more than 50,000 consumers because of unpaid bills. That’s a tough one, there’s no doubt.

Let’s go to the chief executive of the Australian Energy Council, Matthew Warren, who’s on the line. Many thanks for your time Matthew.

Interview with: Matthew Warren, Australian Energy Council, CEO

Matthew Warren: Evening Ross.

Ross Greenwood:  It’s a while since we’ve spoken and that suggested other political matters have really overshadowed energy for the time being but people have got to concentrate on this because it’s not only affecting their but also there’s still the question marks about whether Australia and all the states, and all different regions can get through this summer if it’s a hot summer without blackouts or burnouts during that period.

Matthew Warren: Yes, so we need to make sure the system’s secure get power price down and that hasn’t changed yet. We’re all working hard to try and support the national energy guarantee to do that. And that to us is like a cape in reform. It won’t solve everything but it’s a really important step forward.

Ross Greenwood:  Okay, just explain exactly how the national energy guarantee will work, and the way in which that guarantee can provide cheaper prices to households.

Energy Guarantee

Matthew Warren: It’s simply trying to allow for investors to come back into the market but the basic problem we have, the big reason for rising power prices in the last year is we’ve beginning to run out of electricity. We’re seeing 5,000 plus megawatts Northern Power Station in South Australia, Hazelwood in Victoria has closed and we haven’t replaced them. So, this is about returning investment confidence, creating a clear signal of how the government will manage the energy market over the next two years and allowing investors to come back in and build that capacity of getting prices down.

We think it’s doable, we’re already seeing some encouraging signs from what we call a forward contract mark which is looking at the power prices in 2019 and 2020. They look like they’re coming down, we need to make sure that’s a lock in and not just a hut.

Ross Greenwood:  What type of power is being provided into the grid because it’s certainly not coal-fired power stations that’s pretty obvious, so what type of new energy is being commissioned to provide this energy guarantee.

Matthew Warren: Well, at the moment, nothing because we’re still working on the design but ideally it will be a mixture of whatever is available but gas, storage pumped hydro, and we don’t rule coal out. Coal will need to meet to emissions conditions and on the fact is that we will look at whatever the swade of investible technologies that are available to us to build, anything is better than just having a grid which basically disintegrates slowly over time.

Ross Greenwood:  What about the actual energy use themselves? In other words, many of your own members and particularly some of those very big heavy energy users and I’m talking about steel works or aluminium smelters, super phosphate plants, wherever it might be; because they’re big energy users, quite often it might be the energy companies that go to them to try and withdraw electricity on very hot days for example when there’s peak demand. Do you believe that there will be sufficient electricity around for those very big users on the very hottest of days?

Matthew Warren: The best thing about the Ross, coming up, we know summer is coming, we know it gets hot, we know we use a lot of electricity and we– It’s like we’re in final day, we prepare for it. So, we can’t guarantee– Like any summer, regardless– We’ve had blackouts through my life and we get them on a hot days, things go wrong but we’ve done as much preparation.

The market operator has done as much as we can to make sure we’ve got everything available most days and to contract those big smelters and other big users to say, “look, on these days, here’s the deal; we’ll contract you to switch off for those days and we’ll give plenty of warning so that you’re not disadvantaged and we’ll pay you compensation for that.

They will sign those deals, so that’s all in place. My experience with this is, you can’t be certain of anything. But that the things that surprise you, that gets you more than things that you planned for. So, there’s been a lot of planning and hopefully all things are going well, we’ll get through the summer okay.

Ross Greenwood:  I do notice, say for example that the Daniel Andrew’s government in Victoria right now is considering a range of different reforms, changes to the system; but one of the things which is controversial is a so called, “basic service offer.” In other words, families will be able to get some basic energy deal at a fair and reasonable price. Does this really fly in the face of having enough electricity at the right place, at the right time? Or is it some sort of fair proposition industry man embrace?

Matthew Warren: No, it’s a different issue. The problem with it, it sounds great in theory. The problem we have in practice is through the work, it basically kills competition and the reason why that’s a problem is what we can see is, what we need now is more flexibility. We’re going to need customers; both commercial customers and residential customers to tell us what they can, and can’t do. What they are willing to try and what they’re not. Now, somehow. They’ve got power pumps and air conditioners and on hot days, they’ll make different choices about what they can do.

If we can get households who want to switch off or turn down some of their appliances to do that, then we contract them for it, they save money and we save having to build all that capacity to anticipate their usage. Once you flatten the market, that’s good. You basically, you’re going back to the 1960s. Everybody is on the same price. Everyone’s on the same deal and we’re massively over building the grit to cope with everyone using electricity at the same time. We need to be smarter than that and so we’re really keen on– We’ve started the competitive process, there’s things we’re still got to improve but it’s certainly the way out of this in the 21st century.

Ross Greenwood:  I’ll tell you what Matthew Warren, always great to have him on the program, he makes so much sense. The chief executive of the Australian Energy Council. Again, give us a call if you’re struggling with energy bills or want to tell me exactly how much they’ve been going up. Gives a call on 131-873.

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