The City of Sydney is launching a second bid to bring Australian energy regulations in line with changing technologies and customer preferences after the Australian Energy Market Commission (AEMC) rejected an initial request.
The City says modernising the regulations will encourage efficient, decentralised energy generators. It made a joint proposal in 2015 with the Property Council of Australia and the Total Environmental Centre, calling for local electricity generators such as trigeneration plants and renewables to receive credits and pay lower network charges because they put less strain on aging electricity networks, particularly during peak demand times and significant events.
The City says these credits would cost significantly less than building new power lines, improving efficiency while bringing down network costs overall.
The Commission rejected the proposal in a draft determination in September, arguing it could lead to increased electricity prices. The City has made a submission to the draft determination.
In the wake of South Australia’s catastrophic grid failure, Lord Mayor Clover Moore said it was untenable for cities like Sydney to rely on a 20th Century energy model.
“It’s time Australia’s energy regulators caught up with changing technologies and customer preferences,” Moore said.
“Our population is growing, especially in the capital cities and urban centres. As demand for electricity grows and our infrastructure continues to age, we should be doing all we can to ensure catastrophes such as we recently saw in South Australia don’t happen again.
“I was dumbfounded by the AEMC’s dismissal of our proposal on cost grounds, particularly when modelling from the Institute of Sustainable Futures showed a proposal similar to this could save more than $1 billion by 2050.”
Moore said that if networks don’t develop fair, efficient pricing for local generation, consumers will increasingly avoid the network by locating generation off-the-grid – increasing prices for the customers who remain and have to pay for the poles and wires already installed.
Coal fired electricity used in Sydney is transported from the Hunter Valley, Snowy Mountains, Gunnedah and Broken Hill.
“Yet a customer who buys energy from a local generator, such as a building across the street, pays the same network charges even though they don’t even use the transmission network,” Moore said.
The City says its proposed rule would be more equitable, creating an incentive for generation to be located in the parts of the network with the highest value.
In a response to the City’s initial request, AEMC Chairman John Pierce said the regulatory framework already provided, “a range of incentives to network businesses to provide a safe and reliable electricity supply at the lowest possible cost”.
“The original request would have achieved little but higher prices for all consumers,” Pierce said.
“It would have built a new, expensive subsidy into the regulatory framework for a particular group of energy producers.
“Our analysis shows that paying credits to embedded generators would likely result in higher costs for all electricity customers because payments would be made regardless of whether the embedded generator is located where it provides value.”
Pierce said the Commission also found that the credits would distort the incentives for investment in embedded generation at the expense of other services, such as demand response, that may be lower cost or offer greater benefits.
“Encouraging lower cost alternatives to investment in the network can be achieved without the extensive costs of a Local Generation Network Credit scheme,” he said.
“Consumer choice should decide what innovations and services will prosper.”
The AEMC's draft determination can be read here.