New Electric Industry Paradigm Collides With Old In Queensland


The state-owned electric utility in Queensland crunched by new electricity economics, failure to adapt

Queensland Premier Newman and his team were quick to blame solar, carbon, Gillard – anyone but themselves –for the big rise in electricity bills announced on Friday. Perhaps it’s time for Queensland …

I have reviewed the effects of rooftop solar on traditional utility operations and pricing several times (German Rooftop Solar Juggernaut Is “Unstoppable”The economics have changed, new baseload power is likely deadThe Death of Load Response – By Solar, On The Roof, With The Battery; For the U.S. Electricity Future, Look To Australia; and Disruption On All Sides – What Is A Utility To Do?).

Utilities must recognize that the change in technology means they must get their prices aligned with how they incur costs. They must change prices relatively slowly to give customers a chance to respond, which means they must start now. They must figure out how to do business in the new cost world.

But they don’t. Until it is too late. And it is even worse if the politicians control the utility and the prices, because there is no market cost of capital discipline and an even slower response as they try to maintain relations with large donors and angry voters.

Some selected quotes:

“Energy experts say the Newman policy cocktail – a combination of state subsidies on electricity use, price freezes, tariff designs that add fixed costs and do not encourage peak demand reduction or energy efficiency, and his choice of demonising new technology rather than embracing it, will simply accelerate a spiral towards stranded assets rather than an efficient network.”

“In the residential sector, the same trend is appearing. Standing charges will triple under the QCA recommendation, lifting the share of fixed charges on total bills to nearly a quarter in some cases. It penalises those that use less energy – either because they cannot afford it, or because they have solar or are being energy efficient.” [Note: this price change must happen, but it is too rapid and the costs too large from alleged "gold-plating".]

“Rob Passey, from UNSW, says the network operators face a conundrum – they (and the state government owners) are keen to protect their financial viability, but they are doing it in a way that makes it difficult for energy efficiency and distributed generation such as solar. He suggests the better model is to turn networks into service providers, rather than bulk billers.

Otherwise, as network costs rise more people would be given an incentive to leave the grid – a concern expressed by some retailers. The warning signs are there: Even the ABC radio and the mainstream print media in Queensland have been interviewing homeowners who are looking to go off-grid. Passey’s fear is that the same rules that apply to the water supply – homeowners pay for the mains going past the house whether they use it or not – will be used for electricity.”

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