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Australians are going to pay for a failed national energy policy.

Paul Budde's picture
CEO Paul Budde Consulting

Paul Budde is the CEO of Paul Budde Consulting, an independent consultancy company, focusing on the telecommunications market and its role within the digital economy.  Paul specialises in the...

  • Member since 2016
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  • Apr 30, 2021

The Australian Energy Market Commission (AEMC) has indicated that the electricity grid is struggling to cope with the changing power landscape, which is generating more solar energy than ever before.

It has also flagged therefore that Australians with rooftop solar panels could soon be charged for exporting electricity to the grid. This is, of course, outrageous as it is not the fault of the owners of solar panels that the grid cannot cope. It is a lack of proper energy policies over the last 15 years that has prevented the energy sector from upgrading the grid to allow for good functioning interconnections with solar panels.

The Federal Government has for the last 15 years failed to come up with a national energy policy. Its policy view is heavily influenced by the coal lobby. This has led to uncertainty and indecisiveness. Because of this, the electricity distribution network has not been upgraded to cope with the change in energy generation.

As a penalty for failed government policies, it will be the owners of solar panels that will have to pay for this. It is very similar to the fact that the price for a failed NBN policy will result in charging the users more money for broadband connections.

Those advocating a long-term holistic vision have always indicated that we will need coal for years to come and that it should of course be included in a long-term vision and policy that would gradually switch over to renewables. However, even such a gradual (20-30 year) policy seems to be too scary for the current Coalition Government, so the overall Federal energy policy remains in limbo. As a result, we see bandaid solutions rather than structural outcomes.

Like the NBN issue and the telecoms industry, in the energy sector, the industry has consistently asked for a long-term vision. Under current regulations, energy providers are discouraged to invest in new technologies as these costs cannot be considered in the prices they can charge to the end-users. As a matter of fact, we are not aware of anyone (except coal industry representatives) that has not been urging the government for a long-term energy plan.

Behind the scenes, all the big players are trying their hardest to offload their coal portfolio as quickly as possible. The financial market has largely withdrawn its financial support for the coal industry and business investments are now all favouring renewable energy projects. All the state governments are now on the right side of history.

It is for purely political and ideological reasons the Federal Coalition Government is hanging on to outdated policies that are bad for society, the economy and the environment.

Having said that, in the 2000s these distribution companies’ gold plated their distribution network under an exemption they received, which resulted in a doubling of energy costs in Australia. (Until that time, Australia had one of the lowest electricity prices in the Western world). When they gold plated their network, they did not include facilities that would have allowed renewable energy to be interconnected with their network. As a matter of fact, one could argue that some of that work made it even more difficult to integrate renewables.

Soon after the industry sector finished that upgrade, these energy organisations saw the light. They understood that renewable energy was inevitable and that to stay relevant, they had to become key players in this market.

This saw a 180-degree change from trying to stop renewables to now embracing them. This would require further upgrades to the network – and extensions such as solar and wind farms – but those developments are now hampered by a lack of federal government policies that do not allow or at least make it very difficult for companies to progress on this.

It is not just the physical electricity grid itself, but the infrastructure required at the substations and in between them to enable asynchronous energy flows from renewables to be managed in the grid. Very expensive pieces of infrastructure, which – with foresight in the 2000s – could have been implemented by now and would have avoided much of the capacity constraint issues.

The COVID crisis has seen governments around the world spending hundreds of billions of stimulus dollars that include massive investments in smart energy, fibre optic networks and sustainable developments. However, Australia is failing to do this and is at the bottom of the list of countries that are using stimulus money for structural transformative (green) projects.

Because Australia has sunshine nearly the whole year-round and plenty of "vacant" land, solar farms are a profitable investment.

Here are some examples, which we have also mentioned in a previous article. 

Asian Renewable Energy Hub

This will generate 26,000 MW of renewable energy in Western Australia. Once fully deployed over the next five years, it will consist of 1,600 giant wind turbines and a 78 sq km array of solar panels.

Up to 3,000 MW of generation capacity will be dedicated to large energy users in the Pilbara region. The bulk of the energy will be used for large scale production of green hydrogen products for domestic and especially export markets.

Singapore based Sun Cable project

The development of the Australia-ASEAN Power Link (AAPL) is a major energy infrastructure project that will supply renewable electricity to Darwin and the ASEAN region. As the world’s largest dispatchable renewable electricity system, the AAPL is expected to be the first of many “sun-cables”.

As the regulatory system is making it extremely difficult to link such new developments into the national grid, these companies are mainly looking at export opportunities for the energy they produce.

If there was a national energy policy aimed at the future, the grid could play a key role here. Within the national grid, there is the ability to balance the sunshine hours during the day. Solar and wind together now generate enough power during the day to offset fossil fuels. It is the early morning/evening and night times that are the problem. For this, we need more wind and more storage. The numerous attacks from Tony Abbott and his Government on renewable energy put the industry back around five years, partly contributing to the current issues. Remember Abbott's "ugly, noisy" wind turbine attacks?)

If we indeed see the government taxing people with solar systems (as much as 25 per cent of all Australian households) we might see more households starting to investigate batteries so they can store and basically become energy self-sufficient. This will only increase the size of the problem because, as indicated above, we need a smart grid to handle all of this. People going "off-grid" increases the cost/KW of the distribution network — a no-win situation.

Paul Budde

Matt Chester's picture
Matt Chester on Apr 30, 2021

It is for purely political and ideological reasons the Federal Coalition Government is hanging on to outdated policies that are bad for society, the economy and the environment.

This seems to be too common a theme, no matter what country we're talking about. It's simply a thought exercise, but if you were to build the grid and utility structure from the ground up today with the technology currently available, I don't think there's any way you'd settle on anything close to the status quo. The inertia (and the political will to increase the friction of said inertia) is really so great. 

Paul Budde's picture
Paul Budde on May 27, 2021

Frustrating and very sad for the country Matt. Ideology gets in the way of rational policies.

Jim Stack's picture
Jim Stack on May 1, 2021

Paul, have you monitored the large Tesla 100 Mega Watt battery systems that and are being added to the Aussie GRID?  They have helped stabilize and balance the GRID.   By adding storage it allows much more Solar and Wind. Homes can also add battery storage. It should make the new system very stable and lower in cost. 

Paul Budde's picture
Paul Budde on May 27, 2021

The States are leading Jim and that is of course great. However we do need national regulatory changes to see a much better integration of renewables. I am also worried that in order for the Feds to push though its gas project they might continue to hamper the inclusion of renewables in the grid.

Paul Budde's picture
Thank Paul for the Post!
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