Updated August 08, 2017 17:31:29
Battery giant Tesla has joined power generators, retailers, major energy users and experts in voicing concerns about a central component of the South Australian Government’s $550 million energy plan.
The Energy Security Target (EST) was one of six key measures announced by Premier Jay Weatherill in March.
Submissions about the Government’s policy range from urging caution because it may not lower wholesale prices, to killing off plans for a new interconnector to feed power into the state.
The SA scheme operates in a similar way to the Federal Government’s Renewable Energy Target (RET). But instead of incentivising new renewable projects, it would require retailers to source 36 per cent of the state’s electricity needs from gas generators and other synchronous power sources.
According to the scheme’s designer, economist Danny Price, the energy security target would create more wholesale market competition and put downward pressure on prices, offsetting the direct costs of the scheme.
But renewable energy companies have voiced concerns about the EST saying it would create an effective cap on the volume of renewable energy within the state and lock out renewable generators.
Tesla, which has won money from the Government’s energy plan to build the world’s biggest lithium ion battery in South Australia, is concerned the scheme will favour traditional generators over batteries.
“We do not feel that the draft regulations and supporting consultation paper are representative of the current South Australian position as leaders and innovators in the renewable energy space,” Tesla’s Mark Twidell wrote in a submission to the Government’s plan.
“We hope that the South Australian Government reconsiders their current position, and adopts an approach which will allow global technology leaders such as Tesla to continue to grow their presence in South Australia.”
Even the owners of gas power plants set to benefit from the Government subsidy have urged caution.
AGL’s wholesale markets general manager Richard Wrightson said the state’s biggest electricity generator and retailer supported the principle of the EST “and believes it may encourage more inertia and fault resilient generation, to support system security”.
“We remain concerned, however, that as the scheme aims to replace imported electricity with locally generated power, the desired effect of lowering wholesale prices may not be achieved.”
Fellow power retailer Alinta said while it supported the Government’s pursuit, it was not convinced and thought it “would lead to inefficient pricing outcomes [at least in the short term], sub-optimal dispatch outcomes, increased uncertainty and deter new investment in generation in the South Australian market”.
One of the state’s heaviest energy users, Nyrstar, which owns the Port Pirie smelter, said it was “debatable whether the scheme will be effective at reducing wholesale prices” and may decrease competition in the retail energy market.
“Prospective new retailers may abandon entry to the SA market as the proposed new scheme may be seen as another level of compliance or obstacle to surmount in addition to the existing competitive landscape and market structure,” Nyrstar’s vice president Bertus De Villiers said.
Energy Users Association of Australia (EUAA) chief executive Andrew Richards echoed those concerns by writing “we believe it will add significant cost to the annual electricity bills of South Australian energy users without necessarily altering the nature or structure of the local market to provide greater system security”.
The Australian Energy Market Operator (AEMO) said there were “better ways” of dealing with generation deficiencies and the National Electricity Rules were expected to change, potentially modifying the market.
The owner of South Australia’s transmission network Electranet warned its introduction would likely kill off plans for a new interconnector.
“The Energy Security Target can be expected to substantially reduce the economic case for increased interconnection from South Australia by removing the benefits of increased imports and the resulting lower wholesale electricity prices,” Electranet executive Rainer Korte said.
The State Opposition’s energy spokesman Dan Van Holst Pellekaan said the public consultation process revealed the Government’s policy for an EST was friendless.
“The Government is all at sea when it comes to their energy policy,” he said.
“They change their plans almost weekly and it’s very clear that people from the smallest household to the largest employer do not believe them.”
Energy Minister Tom Koutsantonis told Parliament the EST remained “a key and vital plank of our energy plan”.
“It will incentivise more generation, produce more electrons here in South Australia,” he said.
The Government has delayed the scheme from July to January next year.
First posted August 08, 2017 17:16:51