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10 Feb 2015 Opinion

Good government could start by removing the RET barnacle

Along with key budget measures, the RET sits unresolved and festering. IES CEO, Hugh Bannister, argues for an early RET resolution.

Good government could start by removing the RET barnacle

Of all the mounting layers of barnacles slowing the Australian ship of state, the Renewable Energy Target ought to be one of the easiest to scrape off.  The Warburton review was sprung on an unsuspecting industry and the subsequent stand-off has left it in a state of inanimate suspension.  It’s hard to see what is driving the government’s approach to this issue.  There are no direct budget implications.  The Warburton review’s own modelling, not to mention the modelling of other industry experts including IES, point to the RET delivering lower retail electricity prices, so the consumer benefits from the RET. Many media commentators misunderstand this point.  To be sure, profit margins of existing generators have been and will be less than otherwise if the RET remains. The negotiation is stalled at a number somewhere between the high thirties and low thirties of thousands of GWh.  Other concessions to soften the impact of the target have been made, so the points of difference between the parties are hardly wide.   A quick decision on the RET, one way or the other, will allow the electricity industry as a whole to move on with confidence.

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16 Oct 2014 Opinion

IES CEO's submission to AEMC

Our Chairman and CEO, Hugh Bannister, recently made a submission to the AEMC commenting on the proposed rule change on network pricing. This is an important topic that is sleeping in the public mind now but which is likely to attract controversy when the results of the change filter through to the average retail customer.

IES CEO's submission to AEMC

I wish to make a few specific and personal comments on the approach laid out in the draft determination, supplemented by impressions gained during the September consultation workshop on this topic.

A lack of cost reflectivity in consumer tariffs generally and network tariffs in particular has been a feature of the Australian market from the beginning. Air conditioning has been a growing source of demand, imposing additional strains on the network for a long time, and yet there was no great push before to reform network pricing; rather, networks simply gained approval for and built the capacity needed to accommodate the growth.  Those costs have gone into increased network charges across the board.

The current interest in tariff reform seems to have been driven by the related issues of declining demand and the increasing viability and penetration of embedded rooftop solar PV technology, with a further technology boost in prospect from improving battery technology and costs. Notably, such technology poses little or no extra cost burden on the network.  However, under existing tariffs high levels of PV penetration appear to threaten the current regulatory and business models that sustain the profitability of distribution businesses.

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