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What's behind the green door? The Power Producers' Club

By Geoff Carmody - posted Wednesday, 10 October 2018

Power supply chain providers must have the following data. They couldn't compile power bills otherwise. They don't just make power bills up, do they?

Users need power generation costs. Power can be generated by coal, gas, other liquid fuels, wind, solar, hydro, or other battery discharge. In addition, grid stabilisation and storage costs, allocated across these power sources, should be provided (preferably all separately identified). All of these sum to power use costs for individual users. Across the NEM, the 'mix' of these components varies. The wind component will be large near wind farms (SA). The black coal component will be large in Queensland, and in NSW. Brown coal will be large in Victoria (and as back-up for SA and Tasmania). Hydro power will be large in Tasmania.

Users also need power transmission and distribution costs ('poles and wires'). This covers recovery of capital investment costs, grid repairs and maintenance, and regulated investor/owner margins on top of these (preferably all separately identified). These sum to current supply connection costs. Across the NEM, the 'mix' of these should reflect the generation 'mix' described above, noting the use of transmission and distribution both for 'primary' generation and back up. For example, 'poles and wires' costs for SA would be allocated to SA wind generation (when wind is blowing), or brown coal back-up from Victoria (when it's not).


Users also need power retail margins for each grid catchment area. These, plus generation costs, plus transmission and distribution costs, add up to current grid supply costs for each catchment area. Across the NEM, retail margins may vary depending upon the size of grid catchment areas and competition within them. Large, more compact, catchment areas may have lower retail margins because of greater competition between more retailers than more dispersed, less densely populated, catchment areas.

Other information is needed for full transparency, at the very least at the State/Territory level as well as at the national level. Such aggregates can be apportioned to grid catchment areas in proportion to the power sources for generation applicable to that area.

First, costs of explicit government subsidies for generation and storage should be revealed. These apply to solar, wind, some hydro-power and, increasingly, manufactured battery storage. Some of these are already shown as rebates and credits (for rooftop solar panels, for example). By value, many if not most are not explicitly shown or apportioned across individual power bills. Budget costs for governments are not shown at present for individual power bills. They should be.

Second, efficiency ratings for different generation power sources. These are defined as the percentage of power actually generated and used relative to the rated maximum capacity of the generator concerned. These can be shown as explanatory notes in individual power bills. They quantify actual power supplied as a proportion of 'plate rated' maximum capacity across all sources of power. The effects of ageing on fossil fuel generation efficiency, plus effects of intermittency on solar and wind power, should be shown. Battery efficiency over time should be shown (it declines as batteries are recharged). Renewables force fossil fuel generation to become intermittent and more costly. This effect should be shown (and separately identified).

Armed with this information, power users can assess for themselves the main drivers of changes in their individual power costs. These assessments allow a better, evidence-based, 'fix' on the true cost of renewables versus fossil fuels across the power supply chain as well.

Some might argue providing extra data in users' power bills is either (i) too burdensome or costly for suppliers, and/or (ii) intrudes into 'commercial-in-confidence' territory. Rubbish.


Along the power supply chain, this information must already be available. Users should be told the margins on supply costs for regulated assets – transmission and distribution. These reflect regulated rates of return that users must pay. Total margins for selling power – an essential service – are similarly of interest.

More information promotes (i) better competition, (ii) better understanding of why power costs are high, and (iii) better-informed policy decisions on power affordability, reliability and the actual price we must pay to reduce our own greenhouse gas emissions. The last-mentioned price at present is a dirty big secret.

The PPC's a bit like the computer Deep Thought in Douglas Adam's Hitch-hiker's Guide to the Galaxy. It can provide answers to questions. Often, its answers aren't explanations. They're ex cathedra assertions, like Deep Thought's answer '42' to the question, 'What's the meaning of life, the universe and everything?'

We can better understand such ex cathedra answers if users' power bills include more of the data suppliers use to compile those bills in the first place. Even policy makers and regulators might be better informed.

The PPC brethren have this information. But almost all is behind the green door.

Let users in, by showing it in their individual power bills, too.

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About the Author

Geoff Carmody is Director, Geoff Carmody & Associates, a former co-founder of Access Economics, and before that was a senior officer in the Commonwealth Treasury. He favours a national consumption-based climate policy, preferably using a carbon tax to put a price on carbon. He has prepared papers entitled Effective climate change policy: the seven Cs. Paper #1: Some design principles for evaluating greenhouse gas abatement policies. Paper #2: Implementing design principles for effective climate change policy. Paper #3: ETS or carbon tax?

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Creative Commons LicenseThis work is licensed under a Creative Commons License.

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