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The Abbott Government

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In a competitive market you would expect mainstream Elco's to reduce their charges to compete with solar. Considering the subsidies given to fossil fuels, is it not fair that alternatives get subsidies as well ? The other option is to give no subsidies to anyone.

I haven't heard the party of free markets backing down on giving subsidies to fossil fuels like they backed down over assistance to car industries.
 
That doesn't answer the question about where the money is coming from to pay subsidies to solar panel households.

From AFR, November 2014


http://www.afr.com/p/national/hidden_solar_subsidies_costing_households_pgs3afJN6ipvnWNYP6gzPP

Less than fair that those affluent enough to afford the capital outlay of solar panels should be subsidised by those without the means to do so. That is my point.

There is plenty of railing against Super tax concessions. The principle here seems to me to be exactly the same.
 
Less than fair that those affluent enough to afford the capital outlay of solar panels should be subsidised by those without the means to do so. That is my point.
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I suppose the rationale is that people who are feeding power into the grid take a load off the system so others have more available capacity. The general taxpayer does not have to fork out for the capital expense of extra generating capacity.

The real question is imo, why have prices gone up for the mainstream users ? To maintain a guaranteed profit return for privatised power distributors ?

Therein lies the whole weakness of major utility privatisation. Private companies won't buy large infrastructure unless they get a guaranteed return, which means the consumer doesn't get the benefit of competition from alternative suppliers.
 
One of the benefits of roof-top solar power systems feeding into the grid, is that on days like this, when the temperature here is currently 34, we don't incur any more breakdowns of the system due to the massive overloading by air-conditioning.
 

Power distributors have fixed costs that do not mitigate when people move off the grid or feed back into the grid. The distribution network for example still has to be maintained and with less users, the fixed costs per user increases. Although solar panels help out when the system would have otherwise gone into overload, during normal load times there is also the fact that for many distributors, depending on how the electricity is generated, you cannot simply cut back supply. It is not like a volume control button on a stereo, but more like step changes and only when you get below the next step down level can a supply source be turned off. I'm sure others can explain that a lot better than I have.

I would expect the main saving for power generators is delaying or avoiding having to provide new generation facilities to meet increasing demand (should that be the case). If the additional supply from household solar can allow increasing demand to be satisfied by the existing infrastructure, then not having to build a new power station would be a huge saving.
 
Julia said:
That doesn't answer the question about where the money is coming from to pay subsidies to solar panel households.
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The whole issue of electricity pricing is a complex one, and the vast majority of consumers are either paying or receiving a subsidy.

We tried fixing it in Tas 20 years ago long before solar became significant. The whole thing was shot to pieces by everyone from the general public through to mainstream politicians and I can't see it ever being tried again unless there really is no alternative. Those receiving subsidies are a powerful force indeed.

But if we were to get it right, then it's not overly difficult to work it out with the main issue being fixed supply charges versus variable energy charges on a consumer's bill. Trouble is, a "fair" daily fixed charge is just under $2 per day and that idea upsets a lot of people. Sure, consumption charges would be a lot lower, around 15 cents / kWh, but that doesn't appease the anger in practice since by definition 50% of consumers have below average consumption.

In reality, electricity has moved from being a one-way (power stations to consumers) supply of a "service" that, if it wasn't for the point that you can't see it, would otherwise be considered a "good". Now it's a two way system, the vast majority of generators in the grid now are small solar systems (though they generate a minority of the actual electricity) and there is a much greater spread of consumption than there used to be.

At one extreme there's the house that's completely off-grid. At the other end is the house with electric everything and no solar. In between you've got those who have electric heating / cooling versus those who don't, those who cook with gas versus electricity, electric hot water versus gas or solar, LED lights versus halogens, and so on.

A further complexity arises once social issues are factored in. Firstly, electricity consumption as such is no longer considered a "good" thing by many on account of environmental factors. Then there's the more traditional social issues since the least energy-efficient homes are often occupied by those who are already economically disadvantaged. A higher daily charge and lower unit rates would actually help such people, but the welfare groups sure don't see it that way. Then of course there are the absolute lowest on-grid consumers, most commonly shacks or other second residences - and if you own two properties then it seems fair to assume you're not broke. But as we found out 20 years ago, shack owners are a surprisingly powerful lobby group who don't like giving up their power subsidies.

And so on. The whole thing is complex, given that the days when most homes had a very similar level of consumption are long gone and unlikely to return.

Finally, it's now a market as such and markets don't price anything at the cost of production. We're living in a world where you paid $x to sit on a plane flying from Melbourne to Brisbane and the person sitting next to you paid half or double what you paid. It's the same plane. You get the same everything but you paid a very different price for it. That's what the shift from regulated prices to a free market does.

At some future time it will be fixed, I'm very sure of that. We'll end up with something very similar to what we tried in Tas 20 years ago. A great big daily fee and lower unit energy rates. But it won't happen until there's a big enough crisis to force it.

All that said, solar subsidies are a minor influence on power bills overall. They have an effect, but it's relatively minor compared to many other influences. If cheap power was the objective then we'd still have integrated utilities. They had their inefficiencies yes, but they were very clearly cheaper than what replaced them.
 
bellenuit said:
It is not like a volume control button on a stereo, but more like step changes and only when you get below the next step down level can a supply source be turned off. I'm sure others can explain that a lot better than I have.
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Getting a bit off the Abbott Government topic but:

In short, there's a big cost to start up a coal-fired unit, and a modest cost to start up some gas-fired units. They also have minimum output levels, generally 20 to 50% of capacity depending on fuel and plant design, to remain online thus avoiding a shutdown.

There's no real money to be made in the power generation business these days however. Current prices as follows:

Qld = 3.651 cents / kWh
NSW = 3.362 cents
Vic = 1.940 cents
SA = 1.910 cents
Tas = 1.624 cents

Average prices since 1st July 2014 have been:

Qld = 5.306
SA = 3.828
Tas = 3.764
NSW = 3.619
Vic = 3.165

Now go and have a look at your electricity bill. I can assure you the money isn't going into the power stations, indeed they're slowly going broke with about 3450 MW of plant closed or mothballed over the past few years in the eastern states (including SA) and a further 400 MW that's still open for business as as such but is sitting idle in practice. Some of that plant may run again someday, some of it never will (being physically dismantled and sold for parts or scrap metal).

To put that into perspective, that's about the same size as the entire Snowy scheme, or enough to run the whole of SA during a major heatwave when demand peaks.
 

Smurf1976 said:
The whole issue of electricity pricing is a complex one, and the vast majority of consumers are either paying or receiving a subsidy.
Click to expand...

Thank you bellenuit and Smurf. Exactly the point I was trying to make.
Many people are receiving power bills which show a credit balance.
That is in direct contrast to those whose bills are massively increased.

We now have tens of thousands of people, at least in Qld, who have had their power supply cut off because they are unable to pay the bill.
No one can tell me that's fair, especially in the extremely hot conditions at present here where most of us with no financial restrictions are freely running our air conditioning.
How awful for those who don't even have the benefit of a fan to move the warm air around, or the capacity to boil water, operate a washing machine with small children in the house etc.
 
How awful for those who don't even have the benefit of a fan to move the warm air around, or the capacity to boil water, operate a washing machine with small children in the house etc.
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Yes it is awful. But that is what we get when we have governments who don't want to be bothered running utilities and think the private sector can do it better/cheaper.

The whole power price fiasco (and Telstra as well) proves that is not always the case.

Maybe Smurf and bellenuit would like to give their opinions on the best way to transition from one form of power generation (fossil fuels) to another (renewable).

There must be a best practise for this somewhere in the world. It's going on in a lot of countries.
 

It's the same problem in any industry with an added one that the grid by its' very nature isn't easily adjusted in terms of scale.

Take, for example, airlines as a whole. If passenger numbers drop 50% but they wish to retain the same frequency of flights to the same destinations then fares must double, less whatever is saved by needing fewer baggage handlers etc. But baggage handlers and check-in staff are relatively cheap, if you're still flying the same planes to the same places then you don't save much money simply by dealing with half as many passengers. OK, you do save on fuel (as do power stations) but you have a lot of fixed costs which don't change much. End result = fares go up.

Same with electricity. If we've still got the same transmission and distribution infrastructure (the grid), if we still have it available to everyone from the cities to rural properties, then the cost per unit of power sold is largely the inverse of quantity. If volume drops then costs go up and vice versa.

That logic was well understood at least 80 years ago. It was always a pretty simple game plan. Grow the bulk load via attracting heavy industry, smooth out the retail load via off-peak etc, and that enables you to build big (efficient) power stations, run them hard (minimising cost per unit) whilst minimising the cost of the grid itself (by keeping the peak load down relative to average load.

Trouble is, in 2015 all that thinking has gone out the window.
 
SirRumpole said:
Yes it is awful. But that is what we get when we have governments who don't want to be bothered running utilities and think the private sector can do it better/cheaper.
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Rumpole, in all regional Queensland the utilities are government owned and run so you can't blame privatisation.

My impression is that predicted demand saw increased infrastructure (which of course has to be paid into the future), much of which was sorely needed as I've previously described, then Labor introduced massive subsidies to householders installing solar, a greater than anticipated take up rate occurred, and the rest is history.

I don't care who does something about it, but we should not be feeling OK about a society where ordinary people, trying to pay for the basics of life, are unable to have electricity connected to their home. It is simply wrong.
 

I understand what you are saying Julia, but I live in NSW where the power distributors have been privatised and the situation is the same.

I did post a while ago an article explaining the reasons behind the price rises and it basically came down to investment in poles and wires (which I applaud of course) and guaranteed returns to power companies.

I certainly accept smurf's point that the whole area is very complex, however I think it would be a lot less so if it wasn't for privatisation and the added complexities of profit and corporate risk.

If rooftop solar reduces the burden on the generators then one would think that must be a good thing in national terms (if not private profit terms), but the national interests and those of the consumers seems to have been thrown out the window.
 
SirRumpole said:
Maybe Smurf and bellenuit would like to give their opinions on the best way to transition from one form of power generation (fossil fuels) to another (renewable).
Click to expand...

By its' very nature it is an engineering problem. Tell an engineer what you want, and their job is to work out the best way of meeting those requirements. Tell them you want to transition to x% renewables over y years and do so at the mimimum cost which meets a certain reliability criteria. Then leave it to the engineers to work out the "how" bit, that's what they're good at.

History tells us the answer here.

The former SECV (State Electricity Commission of Victoria) was set up for the specific purpose of transitioning the state to alternative energy. At that time, Victoria depended almost entirely on coal from NSW. The trouble was two-fold. Firstly, NSW coal supplies were unreliable. Secondly, it was never going to be cheaper to ship or rail NSW coal to Melbourne than to use the same coal in Sydney. Victoria was thus plagued by energy shortages and would always be at a cost disadvantage to NSW, something that would inevitably deter industry from establishing in Vic.

And so the SECV came up with a plan, a big plan actually, that involved local resources. They assessed what the state had, and concluded that brown coal and hydro-electricity were the cheapest and most practical options available. Note in this context that brown coal technology was unproven outside Germany at the time so a great deal of risk was involved.

By 1924 the first power was being produced from brown coal, they had a brown coal briquette works up and running too, and by 1928 the first hydro station came online in Victoria. A decade after deciding to look at the idea, and just 7 years after getting serious, Victoria now had a substantial power system with the Yallourn brown coal plant for base load, hydro for intermediate load and the now state-owned plants in Melbourne converted to run on briquettes for peak load.

The SEC then went about continuing to build more brown coal power stations, more briquette production and more hydro schemes with an ongoing construction program. By 1961, 40 years after it started and despite a major flood submerging its' mine, a major bushfire also causing much damage, the Great Depression and World War 2, the objective had been achieved. Victoria no longer depended on black coal not just for power generation, but for any public or private use apart from 10% of it's town gas supply (and by the end of the 1960's that too was gone). Electricity now came from brown coal and hydro. Brown coal technology itself had been drastically improved from the early efforts too. The SECV's briquettes had replaced black coal in industry. The NSW miners could go on strike as often as they liked and it wouldn't put the lights out in Victoria.

OK, so brown coal isn't an "alternative" energy source these days but the same principles still apply. Decide upon the objectives, put some engineers in charge, and leave them to get on with it.

Victoria would never have moved away from imported black coal if the "market" approach had been allowed to prevail since the status quo was profitable and a private electricity company has no interest in broader economic development of the state. They did try that approach, the free market, and it did indeed fail to develop alternatives. That's what the SECV was set up to address. SA tried it too, eventually giving up in the 1940's and setting up ETSA.

I'm not saying that we can't have private investment in public utilities. There is no real reason why that cannot be done. But if we want cheap power, and we want to transition to renewables, then fundamentally that is by its' very nature an excercise in planning not well served by having competing entities each operating without an overall plan.

Witness for evidence that one particular company (ASX listed) has just committed Victoria to another 30 years of reliance on a substantial gas-fired power station. And that same company is involved with building LNG plants in Qld which will more than double the cost of operating gas-fired generation. That is very clearly not an exercise aimed at minimising costs to consumers.

Set the rules and leave it to engineers and associated people, not financial types, to make it happen.
 

Who is footing the bill for the massive subsidies tot he electricity sector? They are able to calculate their costs using inflated interest costs, they get a guaranteed return on ALL investment whether needed or not.

So you claiming a potential future technology and consumer change is already impacting prices?

Very few people with solar have gone off grid, and in general terms even with the massive increases in fixed charges and where one could generate enough electricity to net out their variable usage charges, the grid connection is likely to remain cheaper than going off grid with storage, and from a few reports I've read, it is likely to remain this way for a considerable period of time. What is far more likely to occur is that the current increase in efficiency will continue, and the distribution networks are going to be forced to change the way they operate or perish. How we are charged for electricity is going to have to change so that those running their air con and being the cause for the 10% or so of infrastructure used for less than a week of the year actually pay their fair share, rather than the current system where those without aircon provide massive subsidies for those who have it. Reports I've rad indicate that for each aircon unit connected to the grid requires $5000 to $7000 in network CAPEX. How do you think we should get around that major subsidy?

How about you put some $$ figures to what you believe is the unfair cost burden forced onto electricity users for solar / wind and other green sources of power. What is that per user? Hint, the scapegoat gives a decent idea of what it was like till mid last year.

You are ignoring the fact that the increase in wind and solar has caused wholesale electricity prices to be suppressed. So while subsidies are provided for a small % of total generation, they act to suppress the price paid on a far larger amount of electricity purchased. Even the Govt's own biased review had to admit that the RET will in net terms lower wholesale electricity costs to the extent that all electricity consumers will save more money by the merit order suppression of electricity prices than the schemes cost. So exactly how is that a cost issue for electricity consumers?
 
syd, I'm not entering into an argument with you. See remarks by bellenuit and smurf.


Plus, at least here in Qld, government has acknowledged additional burden on non-solar panel households of costs of paying subsidies to those affluent enough to afford the capital outlay.

You repeatedly complain about the social inequity of tax free advantages for retirees, presumably because it's a situation you do not presently enjoy yourself, and want what you see as the tax burden on yourself removed. That's fair enough. I don't disagree at all.

The principle of people who are well off enough to erect solar panels and as a result pay no electricity charges v those whose bills have almost doubled in the last four years, some reason for which is funding subsidies to others, seems to be something you prefer to avoid.
 
I'm not leaning either way here on the issue but I do remember being surprised reading a similar article to this one at the time indicating that it's actually low income households that have the highest uptake of roof top solar. http://reneweconomy.com.au/2014/rooftop-solar-uptake-still-highest-in-low-income-australia-63263
 
Mods and Smurf,

On this and other threads Smurf has practically written a book about electricity supply, which is at least as important a national issue as internet access. Any chance of pulling the power posts into their own thread? I don't know how far back in time the posts go but if identifying them is a big job I'd be glad to help out.
 

Yes. This thread has been hi-jacked by someone last week harping on about renewable energy. I haven't read all of Smurf's long disertations but I don't think the Abbott government has featured in them, except incidentally.
 
Calliope said:
Yes. This thread has been hi-jacked by someone last week harping on about renewable energy. I haven't read all of Smurf's long disertations but I don't think the Abbott government has featured in them, except incidentally.
Click to expand...

It's Abbott government policy to reduce the RET, so its policies have an impact on that sector.
 
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