Issue 7 July 2005

Competition not imperfect, say generators

Australia's electricity generators have hit back at Productivity Commission claims that imperfect competition in the industry may increase power pool prices and the volatility of spot prices in the NEM.

Responding to the Commission's draft report on energy efficiency, the National Generators Forum has claimed that there is "no evidence that spot market volatility has much direct impact on consumers or impacts on energy efficiency." The NGF asserts that Australia has one of the world's most competitive wholesale electricity markets, with more than 30 competing businesses.

The Forum says there is little correlation globally between energy market reform and energy efficiency. "Some of the most heavily regulated electricity markets in Europe and Japan also are the most energy use efficient (due to the higher price of energy and greater use of regulation," it adds, "while some of the most deregulated markets are significantly less energy use efficient (due to the lower price of energy and less use of regulation)."

The NGF says it supports the reduction and ultimate removal of regulated electricity retail prices and regulated network charges "in the interests of economic efficiency." It points out that Australian network charges are higher than energy charges, the opposite to most other countries.

Energy management practices 'poor'

Energy management company Energetics has told the Productivity Commission that Australia lags the rest of the developed world in this area. Energetics says it has diagnosed energy management practices on 159 business sites in Australia in the past three and found that only three percent of them have systems established to control energy use -- with 69 percent having no management practices, not even for controlling waste.

Looking at site reviews done over the past five years for businesses spending more than $5 million a year on buying energy, Energetics says it found only two percent with an ability to consistently achieve and sustain energy savings compared with 10 percent in the United States, "which has very poorly developed management practices compared to economies like Japan and Germany."

The vast majority of businesses examined, adds Energetics, have a lack of corporate commitment to good energy management, do not understand their opportunities for improvement or how their performance compares to peers, do not have performance indicators for energy and do not have basic monitoring and reporting systems in place. "We have good evidence that this phenomenon is generally not due to low energy costs, but is largely an issue of corporate culture."

The worst windows

The Australian Glass & Glazing Association has told the Productivity Commission that, from an energy efficiency viewpoint, the nation's windows are the worst in the developed world.

Households and buildings are using 60 percent more energy for heating and cooling than is necessary, it adds, and builders have been ignoring efficient products for 30 years.

The Association says the use of energy efficient products is severely hamstrung because builders "want nothing more from the window than the lowest price, irrespective of performance -- as a consequence the energy performance of today's windows is little better than it was 100 years ago." It claims that inefficient windows lead to Australian homes unnecessarily contributing a tonne a year each to greenhouse gas emissions through poor use of energy "and substantially more for commercial buildings."

It urges the Commission to support a more effective national approach to building regulations to address the issue. The PC's draft report suggests that measures to drive energy efficiency in new residential and commercial developments are not needed.

'Battle' in NSW Govt over energy plan

Total Environment Centre director Jeff Angel, a confidant of NSW Premier Bob Carr, has told a Sydney power conference that "a quite intense bureaucratic battle" is going on within the NSW Government over the State energy plan, which was originally due to be published in April and is now mooted to appear in August. Angel says the NSW Treasury is "deploying all its resources" against arguments that demand management can delay development of new baseload generation capacity until well in to the next decade. "The green image of the Premier is under threat," he adds.

Link 'pays for itself in four years'

Powerlink Queensland acting chief executive Simon Bartlett has told an industry conference in Sydney that the QNI transmission interconnection with the New South Wales system has paid for itself in four years of operation, producing generation spinning reserve savings of $2.5 million a week.

Bartlett says Powerlink, which is owned by the Queensland Government, and TransGrid, owned by the NSW Government, are undertaking a detailed study of options to upgrade the QNI's capacity. The review will take 12 months, he says, and it will take three to five years to complete the upgrade, assuming the project can pass the ACCC's regulatory test for high voltage networks which still does not recognise full competition benefits.

Power flows from Queensland generation plants in to New South Wales can be significantly constrained by networks limitations in NSW, particularly at times of peak demand, Bartlett adds.

Exxon spurns solar and wind development

ExxonMobil, the world's largest publicly-traded energy company, says it expects to see use of wind and solar power grow by 10 percent annually over the next quarter century, but only through subsidies -- and it is not a business the giant organisation, which attracted $US300 billion in revenue last year, wishes to pursue.

The company's economics and planning division manager, Scott Nauman, says ExxonMobil has devoted considerable effort to studying both renewable forms of power, but they are economically "just not attractive."

Nauman adds that oil and natural gas are expected by ExxonMobil to meet 60 percent of global energy demand by 2030, with overall world energy use being 50 percent higher than today. Solar and wind power are projected to meet just one percent of total energy consumption in 2030, he adds. The company sees overall power generation globally growing by 48 percent in 25 years.

Meanwhile the Shell Group chief executive, Jeroen van der Veer, says it will be 2015 before this giant petroleum business has a good idea of which renewable energy resource is a good investment choice. Renewables such as solar and wind power will not be able to pay their own way for at least another 10 years, he adds, but Shell has an approach of trying everything that looks promising in this area. "Long term technology will help to move costs down, but it is better to join the game now."

Keith Orchison

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