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Spending to save: Jay's plan to drive down power prices

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The Weatherill Government has unveiled a suite of plans it hopes will promote greater competition in the state’s energy market and drive down power prices.

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Premier Jay Weatherill and Energy Minister Tom Koutsantonis say they’ll launch a tender to procure three-quarters of the Government’s “long-term electricity needs”, in a bid to lure “a new competitor into the energy market, drive down costs for businesses and consumers, and reduce carbon emissions”.

The Government will also offer incentives for gas companies to service the South Australian market.

“The single biggest effect on electricity prices in the wholesale price area has been due to the lack of competition – not renewables, not other things – but the lack of competition,” Weatherill told media today.

“What these things are directed at is ensuring we increase competition into this market.

“The small number of energy suppliers in SA have too much power – if we increase competition, we will put the power back into the hands of consumers… increasing competition in the energy market is the best way to drive down power prices for SA households and businesses.”

It’s ironic rhetoric for a Government that insists SA’s persistently high power prices can be traced back to the sell-off of the state-owned monopoly ETSA.

But Koutsantonis insists “South Australians are at the mercy of a small group of electricity generators because the previous Liberal Government sold the state’s electricity assets to monopolies”.

“They also scrapped plans for an interconnector to New South Wales in order to inflate the sale price of ETSA, making us vulnerable to spot market price spikes when the interconnector to Victoria is being upgraded – which is exactly what happened in July.”

That situation prompted the temporary re-firing of the Pelican Point power station, after a plea from Koutsantonis at the behest of some of the state’s major power-users.

Today, the Government put forward a more considered power plan – with a $24 million pricetag – with a proposed program that will offer incentives for companies to extract more gas and supply it to the local market.

Koutsantonis said the aim was “to ensure we have a supply of power when intermittent renewable energy is not available”.

“This will increase the supply of gas into the energy market, with South Australian energy generators, industry and households having first offering,” he said in a statement.

Koutsantonis last week invited gas explorers burned by Victoria’s fracking ban to come to SA instead.

Today he said there was “a lack of available gas in the national market, a situation made worse by the decision in Victoria to ban onshore conventional and unconventional gas exploration and development”.

“Gas is an important transitional form of energy generation that works in tandem with renewables, providing base-load power to stabilise the system as more renewables come online,” he said.

The Government says the combined measures – alongside a commitment to explore the prospect of a national Emissions Intensity Scheme that trades credits between energy companies – offer a “medium-term response” to soaring power bills, an Achilles heel for the Labor Government in the run-up to its 2018 re-election bid.

“The current rules also let the big private electricity companies drive prices higher by withholding supply – these measures address this inadequacy,” Weatherill said.

He said there was no guarantee the plan would be successful.

“No, of course I can’t guarantee anything in what is essentially a private market that we don’t control,” he told reporters.

“But what I can do is act on the basis of the best advice that we have – and that is that if you increase supply, you drive down prices.

“What we’ve had is an energy market dominated by a few players; when they sold ETSA, they deliberately scotched competition, by making sure there were no interconnectors with other states… what that meant is the people left in the market had a lot of market power.”

Weatherill suggested the tender process would not be open to existing operators, saying: “We’re not interested in any existing entrant [however] an existing player may propose a new form of generation.”

The procurement of the Government’s electricity needs via a competitive contract award was included in a host of medium-term solutions featured in an “SA electricity market transition plan” leaked to the state Opposition.

The plan, as reported on Channel 7 last night, also proposes the prospect of “small-scale modulated nuclear generators”, overseen by the Department of State Development.

The Government has already announced it will source 25 per cent of its electricity from dispatchable renewable energy providers.

“The measures we are announcing today, alongside steps we have already taken, can ease prices in the short and medium term,” Weatherill insisted.

“To deliver long-term reform, the national electricity rules have to change… we need stronger physical links into the rest of the National Energy Market so SA can continue to increase its supply of wind and solar power and sell it into the national grid.”

Opposition Leader Steven Marshall poured scorn on the proposals, calling the incentive scheme “$24 million worth of taxpayers’ money to correct a situation which was a deliberate policy of this Government”, and saying of the headline policy: “I cannot believe this is a major plank of energy policy – surely the Government has been purchasing energy for some time?”

But he took his most pointed aim at the Emissions Intensity Scheme proposal, saying “it’s quite clear [Weatherill] would like to see a carbon tax back on the table”.

“It’s very clear that he is a clear and present danger to the future of SA,” Marshall said.

 

He said the Liberals would pursue demand management, differential tariffs and a market impact assessment on all new applications for renewable energy in a bid to address surging power prices.

However, the Australian Petroleum Production & Exploration Association’s SA director Matthew Doman praised the Government’s move as a “positive initiative that should help bring more gas to market and benefit local consumers”, calling the $24 million incentive scheme “another example of the state government’s strong leadership on natural resource development”.

“This is a good policy for SA that will help ensure a stable and reliable supply of natural gas to meet the energy needs of local businesses and households,” Doman said.

“It’s encouraging to see a government delivering constructive policies, rather than destructive policies such as moratoriums and blanket bans being embraced elsewhere.

“This will only enhance SA’s reputation as an attractive and supportive destination for natural gas investment.”

Meanwhile, the fallout from Koutsantonis’ shoutout to gas exploration companies continues, with “agricultural advocate” and Member of the Round Table for Oil and Gas Projects in SA Anne Daw deeming his comments “unprofessional”.

“The timing of Mr Koutsantonis’ statements are most inappropriate, given that SA is in the midst of a parliamentary inquiry into fracking in the South East of SA,” she said in a statement to InDaily.

“For a Minister of Resources and Energy to say that gas was a much cleaner form of energy shows how out of touch Koutsantonis is on this subject… many spills continue to occur in SA, according to the 2015 Petroleum and Geothermal Energy Act compliance report, including oil spills, fuel spills and produced formation water spills.

“No Mr Koutsantonis, the unconventional gas companies from Victoria are not welcome in SA.”

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