Electricity cost dissections: do they reveal – or conceal?

The first is: 'What cost increases for electricity have we recorded?'.

The second is: 'What parts of the electricity system are causing these cost increases?'

The third is: 'Are renewable energy sources a major source of cost increases?'

These are inter-connected questions, as are the answers, because generation, transmission, distribution and energy retail are connected, too.

But the quantitative answers provided by the Minister, the ACCC, etc, assume generation, transmission, distribution, and energy retail are separate boxes – cost 'silos' that can be dealt with separately. They assume we can apportion cost increasesexclusively to one of these groups without allowing for how they interact.

This seems unhelpful not only for working out how to address basic cost causes, but also for informing the current energy policy debate (sic).

But it's worse. They actually also break out a separate category for 'renewable energy' or 'green schemes' without saying how that is allocated to generation, transmission, distribution, or retail. I don't know what the estimates for 'renewables' or 'green schemes' mean. Dodgy, maybe?

The basics of the NEM, in my opinion, are these:

• The electricity grid (in this case the NEM) is an interdependent system.
• Generation, transmission, distribution and retail are all links in the chain producing and supplying power to households.
• Bits (generation & retail) are potentially competitive if dividend-hungry governments get out of the way and cease being owners (and make the rules only).
• Transmission & distribution are 'natural monopolies' and need to be regulated as such (as long as rule-making governments don't have dividend 'skin in the game' as government owners, and thus corrupt their rule-making).

But here's the thing: splitting cost components into these separate parts as done now seemingly ignores this fundamental interdependence. They're not additive cost silos: they're connected all the way along the line every bit as intimately as a base-load generator and a home heater. I suspect lots of the new investment in 'poles and wires', for example, is to connect new (often remote?) renewable generation to the grid. Ditto retail costs?

Shouldn't we re-think how we quantify cost pressures in this area?

In the current debate (sic), shouldn't we recognise that a given stream of power generation must usually flow along a given transmission/distribution set of 'poles and wires', and be delivered, via a contract with a retailer, to 'home sweet home'?