Category: Carbon Competition & Consumer

Selling short in the energy market – symptom or disease

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Have you ever suspected your Energy Company of gaming the rules? Consider this: A energy retailer in NSW has argued they can remain silent on an energy supply transfer and then penalise the customer with adjusted early termination fees. Small business is particularly vulnerable to this activity. Have you been affected? Speak up now.

We write this after a story recently ran that was commissioned by the St Vincent De Paul, 28 May 2014, ‘Energy Retailer not Adequately Disclosing Additional Fees’. It would seem some success has been the outcome. You may find similar matters very common for small business and the protection is less clear. It also follows that small business can be classified under the electricity rules as large when under company rule they are small business. The tactics of taking advantage of a customer is part of our story.

Consider the retailers argument: Section 6.10 AEMO rules prevent them objecting to Transfers in NSW. A wonderful twist that Tony the Weasel would be proud of for sure. What this retailer then did was objected to a ‘to the market to transfer DCL’ (Form called a CR1000) and then withdrew the objection. They then remained silent on their intention to levy the charge. In one instance we know of near $10,000 is the adjusted fee charged.

We find it difficult to think other than they are gaming the rules and defining as it suites them. They are embarking on ‘it may be immoral, but is not illegal’ game at the expense of a trust in what we say not what we do.

If you want more evidence consider that the Energy and Water Ombudsman NSW (EWON) web site is showing up to 85% increase on complaints with energy retailers in 2013, benchmarked over 2012 figures. Just imagine what 2014 must have in store for the Ombudsman.

If we go back to the reference instance – it was claimed they broke a deemed supply agreement and fees are payable. The retailer then ignored requests for transparency of the charges and to explain how is was reasonable to claim so much money. The retailer even ignored that the new retailer offered to give back the customer without penalty to any party. It became obvious the old retailer only want the money and not the customer.

What is wrong with that – big business only says show me the money! We are all nothing but an asset.

Our frustration is such that when we looked for an explanation it seems most feasible that the retailer is actually short in the market for black energy. This term is where it is not renewable or green sources. In effect a panic that they are overexposed to the renewable market because of the current government sending out signals ‘old king coal’ will reign for some time. It follows that the amount of contracted energy into the future and the books determine the risk of that business. It would seem the retailer does not want you to consume black energy, nor do they want you to export renewable energy – you might notice if had considered putting in Solar Array, either covertly or overtly you might be discouraged.

If you accept this short sell idea you could consider the behaviour of finding reason to add fees to your exit is akin to double dipping. They want you to pay for what they do not have, or they have already sold it elsewhere. Possibly this matter should go before the AER, they are quoted as saying they have an eye on these sort of things.

If you check out the AER site and the government site www.energymadeeasy.gov.au you will notice they recommend you lay a complaint with the Energy and Water Ombudsman NSW (EWON). If you do so you should definitely know your wants for any outcome.

One want we recommend you consider is consistent and effective communication is your right.

 

energy efficiency barriers – problem 1,2,3

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They are at the end of political and economic capital and old Generation assets have a problem – they are competing with innovation that promotes efficiency. The problem is not new, just reborn ideals that have new tools available. Recently the ACT Energy Minister said it very well (as reported this week in the RENeweconomy ) as the real issue is not that wind, solar and other technologies are added to the grid. It’s that old and inefficient generators are refusing to leave. Therefore new renewables are not the problem.

Looking at the problems of our energy system as a whole CO2Land org sees, just like our bills read – three pricing areas that can be improved. Or should we say need to be addressed.

Problem 1 – the price of energy is set by a market mechanism that in Australia is opportunistic. Old inefficient generators can remain viable by gaming based on availability and triggers to elevate prices. So long as they remain the ‘baseload’ capability and sufficient ‘events’ occur in the market they will remain viable. With or without a renewable target review, the Old King Coal will remain. But we will pay more – not less. Why? Like an old car it needs maintenance and those costs must be passed through. Of course the fuel cost factors in too.

Problem 2 – the Grid system is a capital hungry beast. Both transmission and distribution networks (poles and wires) are encouraged to overinvest. Overinvestment is encouraged in the name of reliability and capability. How can this be necessary? Our regulatory system set the network charges and penalties. When the prices are set for the charges (network tariffs) the weighted cost of capital and the need for maintenance and cash injections need to be reliably for at least 5 years is part of the formulae. Estimated is approximately 10% more is payed than need be – with or without a carbon price – OK!

So what should we do? Agree to keep up prices or encourage a write down of the asset – In 1996 or thereabouts the answer was do no maintenance other than priority works. The system had sufficient redundancy that it could take it. In this way privatisation can look promising. Then some time later the capital injections will be required again and up go costs – it does sound very much like todays 2014 talk too does it not!

Problem 3 – the issue of managing costs to consumers. This is the vexed issue – the supply side believes costs should go up, demand side costs should go down. Therefore you could say energy efficiency means demand decreases and prices will go down. But, think this Problem 2 shows the networks are overinvested and cost will be recovered even if not actually expended – they can be anticipated! Then think Problem 3, the market anticipates events 5% of the time and this accounts for 20% of the costs. A nice little earner lost if you change that!

We know some of you will be saying but a capacity market will fix that, just change the rules will be your cry. The reality those with the courage to change things will have 5 years to bring about the change and then need to predict 2 years in advance. They will need to establish how to impose penalties on the gamers. And, we know the gamers are very good at lobbying for no change. They might even say climate change bah humbug!

But, you know all three problems have another issue: Each problem area participant can be asked what does efficiency mean to you – The answers are very likely to differ and that is an issue for policy makers too. Think this – Federal government will side with security of supply, state with balance of supply and local and consumers with the cost of supply. Makes for interesting responses does it not!

Inappropriate electricity tariffs – it will cost you!

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Inappropriate electricity tariffs have the potential to cost excessive amounts of money for the unwary. In NSW for instance, the National Electricity Law (NSW) has gaps in it you can drive a truck through. Consider this: Energy Retailers might know you are paying too much for your network charges, and they take no action. The Energy Retailer can request a review of your charges, but apart from a newly introduced mandatory review period, may not provide this service. One retailer even provided proof in saying the do not have the systems in place to be proactive on behalf of the Customer. In other words it may be immoral, but it is not illegal to withhold the service. CO2Land org has written evidence that one NSW small business has claims of having been on an inappropriate network tariff and it costing them as much as 72% more than needed to pay – how much? Almost a quarter of a million dollars ($250,000)!

Another issue is that a deemed contract can exist whether you are aware or not, and it may be a simple communication error that costs you dearly. As a residential customer it may cost you up to $220 because you entered into a new Energy Service Agreement (ESA) and were not aware you were already contracted to another retailer. The charge is a break contract fee. It will not be transparent and a St Vincent De Paul commissioned report suggests it is also unreasonable.

A similar break fee event, that CO2Land org is aware of, involves a Commercial and Industrial (C&I) customer with an annual energy spends of approximately $50,000 pa. This small business was invoiced in excess of $10,000 (including government fees and charges) for breaking a deemed contract. In that invoice no attempt was made to show how the number was arrived at other than the words ‘to cover costs’ and a list of the government charges. The source of these two examples here is Wintelboff – www.wintelboff.com .

Possibly you should contact your favourite energy advisory and have them look at your bills?

Co2Land org is also aware that through the Office of Environment and Heritage (OEH) and in conjunction with Carbon Training International (CTi) ‘Energy Management Basics Training for Business’ is available. The ‘plug’ is because they also offer to review your billing as part of the class exercise, and provide up to 15 hours of technical advice as part of the course.

We are also aware the NSW Business Chamber is offering discounts to its members of up to 19% if they use Energetics to participate in the Business Chamber’s ‘Better Energy Manager Program’.

Which of these groups is better? It really gets down to cost. The benefits are obvious if you are paying too much.

If we go back to the National Electricity Law (NSW) and the way it is framed – sounds like a Roger Rabbit episode! A quick read will make it clear the consumer advocacy part is weak. A large business must engage through a complex process for its matter to be heard. [As an aside a business can be classified as large if it has energy consumption greater than 160MWh pa. However, it may not be large under taxation and corporate laws]. If you need to go to court over your energy bills, the dispute resolution it will be classified along corporate laws. You could be excused for being confused! A course of dispute resolution is to go to the Energy and Water Ombudsman NSW (EWON). What you should know is EWON is not a government-sponsored body – it is industry member sponsored. The body can also make the choice to be involved in disputes? They will make legally binding judgements, but they decide whether to be involved and you must have your wants clearly made and they must be for more than moral issues. They also have guidelines in the use of the body. Currently, you need to have an annual turnover of less than $2million, employ less that 20 people and be a family run business. Some variation to these guidelines are possible, but you might need to contact them if you have questions www.ewon.com.au .

If you did not know there is ‘spin’ that all this be fixed when the assets are sold? As it happens the poles and wires – the network companies in NSW are state government businesses. If the process is flawed you could expect a reasonable person asking why is it not fixed? The answer may be it is an inconvenient truth right now, we are trying to sell the companies!

 

Work Smarter – retail v’s wholesale rules

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The various ways innovation can be killed off achieves only one goal, to prevent us from doing things smarter. In 1994 the Department of Finance issued a statement aimed to clarify working smarter. In 2014 the Australian Government again said: We need to work smarter. What does smarter mean? You could take the view it is a balancing term where working smarter is a term that illustrates the rigor and complexity of the English language. Smarter used this way works equally well in arts, literacy, and performance tasks. However, what if it were used as a verb as an irritating means to stop something innovative?

The US gives us a good example of this where the legal challenge to a regulator that issued a rule for good and smart behaviour needed to be defended because it balanced the demand supply equation and that disrupted business as usual. This example was blogged by Joel Eisen: D.C. Circuit Vacates FERC Smart Grid “Demand Response” Rule.

“Joel B. Eisen is Professor of Law and Austin Owen Research Fellow at University of Richmond School of Law. His scholarly work is available here.

Last Friday (May 23), in Electric Power Supply Association v. FERC, a D.C. Circuit panel split 2-1 and vacated Order 745, a Federal Energy Regulatory Commission (FERC) rule designed to promote “demand response” (DR). DR is a rapidly growing and valuable means of reducing electricity demand, thereby benefiting consumers and the environment. It is also an important part of the Smart Grid, in which smart meters and devices that communicate with one another and energy service providers can further promote these goals. Indeed, former FERC Chairman Jon Wellinghoff has called DR the Smart Grid’s “killer app.”

The case tested a question of near first impression about the Smart Grid: which level of government regulates it? For now, the D.C. Circuit has held squarely for the states, concluding that DR regulation is a matter of exclusive state jurisdiction. If the decision stands, it will have many adverse implications for federal regulation to advance the Smart Grid and use the wholesale electricity markets to achieve energy reductions and environmental goals.”

What was the argument for the smarter innovation? 1. Directly affects wholesale rates by reducing prices and improving overall market functioning. 2. It has the effect of enabling demand-side resources, as well as supply-side resources, and improves the economic operation of electricity markets. 3. The regulator believed there would be limited Demand Response participation in the markets without encouragement.

The disruption to the smarter solution was achieved by dissention. It was not an issue of being straightforward and sensible, it was that it was competing with the established market and compensated those other than the supply side of the market. The smarter practice affected (can do) the wholesale market in a positive way, but it was “a part of the retail market. It involves retail customers, their decision whether to purchase at retail, and the levels of retail electricity consumption.” The regulator was empowered to regulate practices affecting the wholesale market, not the retail market.

So dear innovators, we have a situation: Working smarter has drawbacks, it can inflict pain, it can wound and be irritating to watch the dissenters argue you have no right expecting a retail outcome where it might affect the wholesale heaven of the established. It does tend to put the perspective on the ‘valley of death’ referred to in commercialization preamble!

 

Trade with Asia – price points of gas

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We are part of Asia, and an island. We are isolated and that works for and against our security. Energy Security that is, our trading partners have different views on what is a benefit. As an island we need to transport singular purpose vehicles with product from point A to Point B in the most direct line and this method does not share any of the wealth or contribute to other points and their economy.

If you did not know Russia is on top of this issue and they intend to supply gas to Asia and have been into the driver’s seat in the last two years, to do so: A related project to the gas deal announcements is the intention to build a railway transport system from South Korea though to North Korea into Russia, and then connecting to the Trans-Siberian Railway. The intention is to create high-speed rail connections directly from South Korea to the markets of Europe.

“If such a natural gas line and railway were to be built — and there is strong support for this in parts of the South Korean establishment and business community — it would not only provide South Korean producers direct land access across Central Asia and all of Europe.

It would also provide the impetus for transforming the North Korean economy — and change that region’s frozen geopolitics in the process.

In short, if its vision comes to pass, Russia would become anchored in Asia as it never has been in the past. Better yet for Moscow, all major economies of East Asia would become linked to Russia in a way few had previously imagined possible. And that would be truly a pivot to Asia.” Source The Russia-China Energy Agreement Is the world’s largest commercial deal ever. By Kenneth Courtis, May 25, 2014

What about our (Australia’s) great trade hopes? We are deliberately killing off our innovation capabilities, our industries are moving out – even New Zealand seem more preferable! Even the US learnt it lesson that being a service industry country is a lesson of folly. It takes innovation and small innovations to grow into big to be great. So the question must be asked: Do we think we will be rewarded for thinking Asia revolves around Australia? I guess Russia is laughing uncontrollably at this time at such a thought. After all we have our leader saying I am confident, and the advisors or facts did not substantiate that. It seems that Russia will become enmeshed in East Asia in ways to pose new challenges for Russia and Australia.

The opening paragraph of this post said there are differing views on energy supply within Asia. This evolves around the fact that the new Russian Deal on Gas supply to China has been based on an oil price reference formula. Meaning when oil prices are high, the oil-based price formula for natural gas allows the sale of gas at a higher price than if it were based on spot-market natural gas prices. The implications are the entire world’s gas price will follow this formula. The only difference will be transport costs!

Should have mentioned earlier “the size of the Russia China Deal The largest previous natural gas deal which China has signed was with Australia, a dozen years ago. That was a $25 billion deal and runs through to the end of the next decade. The China-Russia natural gas deal is about 16 times larger.

By any measure, it is a big, big deal. Indeed, it is the single largest trade deal ever.” Again the source is Kenneth Courtis.

Now it seems the odd one out of this deal is Japan, our shining light, maybe:

“Japan is the world’s largest importer of natural gas. It continues to seek to diversify its sources of supply.

Japanese buyers are less focused on price than is China, as they also include in their calculations security of supply, stability of supply and consistency of the composition of imported natural gas. Japan also has accepted an oil reference formula for pricing its natural gas purchases.

Now comes the big question: Who in Australia is talented enough to head us in the right direction?

Car Batteries – policy or technology the bigger threats

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What is a Gigafactory, costs $5b US and is said will reduce battery pack cost per kWh by 30% by 2017? We kid you not the source of this statistic is talking about TESLA plans for an enormous battery factory in south western USA, and the source is IIT Takeshita dated 2013. The report is linked to the BBC news service 31 March 2013. Whilst all that sounds wonderful, we have a problem. The weakest link for the acceptance of the electric car is the batteries.

It follows that the technology of batteries also mean any plans to set up Gigafactories, such as the TESLA plan to produce lithium-ion batteries for 500,000 cars by 2020 is under threat before it has started. New technologies are being developed that could offer better alternatives to address what experts say is one of the biggest limiting factors for electric vehicles.

“The problem these cars face is that batteries are big and heavy, and as a consequence only a limited number can be installed. The Tesla Model S for example, has a battery pack approximately two metres long by 1.2 metres wide, which is installed flat along the floor of the car. In the top-spec car, that gives a range of about 300 miles (482km) before plugging in and recharging is required. The Nissan Leaf achieves more like 80 miles (128km). On top of that, charging is a much slower process than just filling up with petrol.

How can you make a better battery, then? At its most basic a battery contains a positive and negative electrode, a separator and an electrolyte. Many different types of materials can be used as electrodes, the different combinations of materials allowing different amounts of energy to be stored. However battery life and the safety characteristics change as the materials change, so a compromise is always necessary. Lithium-ion batteries are popular, but have been implicated in fires on board planes, and their transport is restricted . Anything more reactive or unstable could be a hazard. Get the combination right, though, and the payoff could be huge.

The latest efforts follow a long line of improvements over the decades. First we had lead-acid batteries, the type that is still commonly used in cars; they are huge. Then, you might remember NiCad (nickel-cadmium) batteries – they were the rechargeable batteries that heralded a new era of portable technology – laptops, phones, and the like, as well as the remote control cars of our childhoods. Then came NiMH (nickel metal hydride) batteries, with about twice the capacity, or energy density. Now modern devices and electric cars are powered by lithium ion, or Li-ion, batteries.” Again the source is BBC News quoting Phil Gott, the senior planning director at HIS Automotive.

Then comes news that there are materials which can double the current energy density available for batteries. The BBC again quoted Daniel Abraham, a material scientist at Argonne National Laboratory, outside Chicago in the US. “We dream up or imagine the types of materials we would like to work with, then we attempt to synthesize the materials in the laboratory.”

Being developed, or maybe more correctly investigated, is batteries known as lithium-air, or lithium-oxygen, or lithium-sulphur batteries. Lithium-oxygen batteries. Talked about, as they are not yet working as planned, but are promising when that is sorted will be an order of magnitude improvement over the current Li-ion batteries.

But although the technology has revolutionary potential, the technical challenges of making a Lithium-air battery work consistently, reliably, and safely – and crucially for extended durations – are large. So far the electrodes have proven unstable.

But we guess we can look forward to a future where we will eventually have better, faster, travel further cars that run on batteries.

The question then becomes: Will the treat to the planned Gigafactory be the technology, will nothing be done after all. Co2Land org supposes if the politics of the day says government will announce yea or nay support after the project is ready to proceed – will it happen at all? It would be an enormous risk for investors. If the government were a more traditional policy announcement then left to be proven would that not be a better business risk? Interesting is it not?

 

 

Renewables require less incentive money – because

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Having read a good news story that renewables require less incentive money because they are very successful, it is then you will notice other media is displaying it as a negative. We suspect the matter will always be reported ‘on balance’ – code for a licence to adjust for the audience. So which story do you want to hear? Is your glass half empty or half full?

Example one: “Global investment in renewables fell by 14% during 2013, but the percentage of electricity generated by renewable sources still grew, a report shows. It said investment fell for the second year in a row because of cheaper technology, but also as a result of uncertainty surrounding energy policy. However, falling costs meant renewables accounted for 8.5% of the global electricity mix, up from 7.8% in 2012. Renewables accounted for 43.6% of newly installed generation capacity in 2013.”

Unfortunately the above is reported as a negative, and actually was a good news story. The good news is – renewables have continued to get cheaper and the industry built more Gigawatt capacity with less dollars. If you continue to research you would notice:
Globally, renewables – excluding large hydro -accounted for 43.6 per cent of newly installed generating capacity in 2013.

Also the costs of generating electricity via onshore wind turbines and crystalline silicon PV systems have fallen by some 15% and 53% respectively since the third quarter of 2009. This means increasingly, the competitiveness of wind and solar compared to conventional options for generation of energy – such as coal-fired power stations, gas or diesel generators, or nuclear reactors. Other evidence is also supplied by the NSW Government that this is a fact. Globally, an increasing number of wind and solar projects are being built without any subsidy support. Especially noted is Latin America, the Middle East and Africa.

Example two: ”The global power utility market is currently undergoing an increase in capital expenditures. Increasing power demands, aging infrastructure, new energy sources and regulatory pressures are contributing to this growth in capital spending and projects.”

Coupling these factors with the staffing constraints of many utilities often results in difficultly completing this increase in workload. However, with these challenges come opportunities to evaluate and create more efficient project delivery models.

The report – Global Trends in Renewable Energy Investment 2014 – was produced by the United Nations Environment Programme (Unep) and Bloomberg New Energy Finance. The assessment said the US $214.4bn (£129.2bn) worldwide investment in the renewable sector during 2013 was 23% below the 2011 record. One of the report’s lead editors, UN energy expert Eric Usher, described 2013 as a “mixed year” for global renewable energy. Identifying the reasons behind the fall in investment, he explained: “One of the major factors was the fall in the cost of equipment. “Another negative factor was a touch of policy uncertainty, which saw investors delay spending their money.” He told BBC News that the fall in the cost of the clean energy technologies – particularly solar – had “left some governments thinking that they had been paying too much and reviewed their subsidies”.

Mr Usher added that while some nations, such as Germany, had been able to adapt very quickly, “other nations have not handled it quite so well, causing nervousness among investors”. He explained that for a number of years, there was overcapacity in the sector and supply was greater than demand, making it difficult for firms to record a profit. But lower costs, improved efficiencies and market consolidation had allowed companies to return to profitability. Mr Usher observed that there were a number of positive signs during 2013, including the fact that the renewable energy sectors in a number of nations, particularly in Latin America, were able to grow completely free of government subsidies. He added: “For the first time in 2013, China installed more new generation capacity using renewables than fossil fuels. “So it is a good sign for the sector that the world’s largest emerging economy is taking the sector very seriously indeed.” Responding to the assessment, Unep executive director Achim Steiner said: “A long-term shift in investment over the next few decades towards a cleaner energy portfolio is needed to avoid dangerous climate change, with the energy sector accounting for around two-thirds of total greenhouse gas emissions. “The fact that renewable energy is gaining a bigger share of overall generation globally is encouraging. To support this further, we must re-evaluate investment priorities, shift incentives, build capacity and improve governance structures.” The report’s findings are being presented to a Future of Energy Summit in New York, US, which runs until Wednesday – article attributed to Mark Kinver (BBC News), 7th April, 2014.

For more on the article please visit http://www.bbc.com/news/science-environment-26923260

If you take the time to read this report you will notice it is a good news story, equipment prices are falling, and therefore not a much is needed to be spent to implement. So investment needed was 23% lower in 2013 compared to 2011. In example 1 the story said prices have fallen by as much as 53% for solar equipment. This can be construed by the shrewd to askew what ever story you want. Enough to sit you ‘Bolt’ upright hey Andrew?

EV’s – not cost, heat management the issue.

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The advisor to the minister responded to a call from a colleague – we want to talk about saving an industry. Advances in electric car technology can make it viable to say many of the limits for production are no longer the problem – the batteries that is.

We went looking for the facts, and a quick search then found a story ( http://www.bbc.com/autos/story/20140204-a-false-charge ) Why do electric vehicles use so many batteries? From that story we learnt the cost of batteries are only part of the issue. It is the battery technology that is the dominant problem. “The world’s most recognisable electric vehicles (EVs), such as the Tesla Model S and Nissan Leaf, run on hundreds, or even thousands, of small battery cells.” Then there is the type of battery construction “BMW’s new i3 electric runabout spreads 96 battery cells across eight modules in its pack. The Leaf uses almost 200 thin laminated film cells that are packaged into 48 modules, and the Model S has more than 6,800 small lithium-ion battery cylinders.”

However, cost is important in the decision on the number of cells to be used. Explaining Tesla’s decision to use lap top type batteries: “Leigh Christie, an EV engineer, says manufacturers’ embrace of smaller batteries boils down to cost. “The capital cost for manufacturing equipment for 18650-size cells is as about as low as it gets,” he wrote. “This cell has been manufactured longer than pretty much any other lithium-ion cell.”

From what is said http://www.quora.com forums note “a nuanced view of why so much variation exists around how many batteries an EV uses, and why the industry is not quite ready for a mega-battery.” So it is not that mega batteries are not available, it is they are more expensive to produce. And, smaller batteries offer temperature control benefits, and were “easier to stack in unique ways to distribute weight and make use of small spaces in a vehicle chassis.”

All that said on further reading it becomes obvious heat is and the managing of heat is the bigger cost issue. Yes, that is correct the cost of managing heat and heat from EV battery cells is something all manufacturers must learn to manage. “The gaps between the cells allow for cooling and minimize the possibility of thermal runaway,” and “That’s why Nissan’s flat laminated cells are designed with a large surface area that quickly disperses the batteries’ heat. Because of this, the Leaf does not require a separate battery-cooling unit, such as those in the i3 and Model S.”

Co2Land org must now conclude electronic vehicles still need more time to be mainstream and the issues with the batteries are the matter that needs the most attention. Namely,

The cost of manufacture, the number required to be diverted from other product needs for similar batteries, the size range available, the matter of managing heat.

Therefore to be fully desirable those problems and issues need to be overcome for long-term success.   It follows we have success in making plant available, we just need technology to catch up with the battery needs.

Solar mean and means

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It is not ‘means’ tested. But it can mean a nightmare. The phone call: My business is wanting to purchase a small scale solar PV array, and I noticed the contract will not guarantee my price, and the price potentially will increase indirectly because the import of electricity will not remain a constant and directly because it is likely the Small Scale Technology Certificate (STC) will not be fixed for the duration.

Why is import of electricity important? The price of electricity is generally either regulated or contestable. Regulated prices are reset according to an application for price changes – you are a price taker. In short, the price changes each reset period and usually set by state government bodies. In a contestable market set by rules of the national body, to reduce your energy consumption you can carry penalties and price risk. Hence, you might find you have to pay a higher price because you have reduced your import of energy needs. Therefore there is no incentive to reduce your energy use.

Next matter is the popular selling point of Solar, and it is the opportunity to benefit from the export of energy. It follows that just as import prices changing is a risk, so is export energy a price risk. Especially when feed in tariffs (FITs) are being phased out, and in Australia – a review of the Renewable Energy Targets (RET), and the promised repeal of the carbon pricing mechanism could see a collapse of the renewable certificate price. The new’ish’ government is hopeful ‘affordable’ energy will follow the review.

So, if you want to protect your purchase by way of a price guarantee from third parties. You most likely cannot if you are larger than 7.5kWp (residential) but under 300kWp. Why? The energy retailers have no interest because of uncertainty exposing them to the price shocks, and commercial buyers of power have a line drawn in the sand of an economic value of no less than 300kWp export capability.

So, if paying a fixed price is important to you – then you should choose an installer who guarantees the price quoted – clearly and irrevocably. Is it possible? Yes, but the vendor needs to be courageous and needs to laterally rethink how they operate. But, we will save that thought for another post.

Still interested in Solar. Onward then we go: What can still be done in Australia to reduce the upfront cost of solar power systems even after hearing “the solar rebate ending”. There is still a financial incentive from the Australian federal government for installing solar. But you need to be quick if you consider the report on the RET review will reach government by July and ‘put to death by the Reich’.

What is tipped to go is the solar subsidy for anyone buying a solar system of up to 100kW. It is called the STC program. Which stands for Small-scale Technology Certificate. Whilst CO2Land org has previously been concerned that the STC is a distortion of the market, it believes any change should be phased out and not shut off suddenly. Another thing to consider is the STC scheme is not described as a rebate (even though it is = it is politically difficult to call it that). If you check what The Clean Energy Regulator says on their website, it says:

“Under the Small-scale Renewable Energy Scheme the reduction in the cost of your solar panel is not a rebate. You will not qualify for any Government-based financial recompense at the completion of any process relating to STCs.”

The meaning of this is that the cash you get off your solar system price does not actually come from the government. It is a government scheme that compels other people to buy your certificates.

So it is a government run scheme, using other people’s money, and it becomes confusing when you consider the question what must change when all government schemes use other people’s money – is it not?  So, if you are confused over why does a scheme that will save you money and tick the box as a financial incentive be considered to have to walk the plank.

The solar Financial Incentive is a subsidy to assist with the upfront cost of installing a Solar Power System. Currently, it is not ‘means’ tested in any way. However, the criteria for claiming it are:

1) Your system is less than 100kWp in size.

2) You get it installed and designed by an accredited professional.

3) You use panels and inverters that are approved for use in Australia.

We said FITs are being phased out, but each state may differ in what is offered. So check out the following, as an example: The Feed In Tariff (FiT). “The FiT is a State Government subsidy in which some states pay you for the electricity that your solar system will export to the grid”.

How to get involved in the Solar Financial Incentive Scheme involves:

1) The regulator creates Renewable Energy Certificates (RECS).

2) The government mandates that fossil fuelled generators have to either build a certain amount of renewable generation (wind/solar) or buy the right to other people’s renewable energy systems in the form of RECs.

3) When you purchase a solar power system for your roof, the government gives you a number of RECS depending on the size of your system is and the region of Australia it is installed.

4) The special type of RECs that you get for under 100kWp solar system are called “Small Scale Technology Certificates” (STCs).

5) You (or more likely your installer) sell the STCs to the fossil fuel generators and use the cash to offset the upfront cost of the solar system purchase.

6) The STC price is a bit like a share price – it fluctuates on the open market depending on supply and demand. E.g. when the solar industry is booming (usually just before the rebate is cut!) then the STC price drops and vice versa.

7) “You can see the current market price of a STC here. Look for the number in the box in the bottom RH corner labeled: STC”.

8) Almost all solar system prices you see advertised will already have the solar Financial Incentive included in the pricing. So watch out for that too.

Earlier we said the amount of solar rebate that you can claim depends on where you live: It is broken down into zones that roughly mean live in the lower southern parts (zone 4) and get less incentive than other parts with central west parts (zone 1) getting the most.

But, beware of a small number of unscrupulous companies that use the “Inflated STC Price Scam” appear to be deceiving the customer into thinking they are getting a great deal and then hitting them with a bill for thousands more than the quoted price when the system is installed.

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Be clear on what you want:

CO2Land org is aware that many installer/vendor quotes are virtually silent on saying they guarantee what is said in the quote as the STC price.

Co2Land org believes the truly good guys will be totally upfront and transparent that the final amount payable may go up (or down) based on the STC price on the day of the install.

It is up to you to make the decision to buy based on the facts. When ready to sign – why not say ‘This contract is signed for this fixed price only’ and make it a written condition, and have all parties endorse each copy!

 

Transistions – SME or Contestable Energy Strategies

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Energy procurement is significantly different in 2014 than previously. The models for success require a multifaceted theme for the energy procurement process this time around.  What is different is you must manage and arranged the information for what you see as the product, and have them – the energy retailer/supplier, evaluate whether they want to participate.  The critical success factor is no longer ‘did you get the best price’, it is ‘did you get enough participants to respond with a good price and adequately market test your result’. It was so much easier when performance was as simple as input becomes output = price paid, and outcome was the accountant is happy.

Some of you reading this may not understand that the original idea of being contestable was to adequately market test and as the market matured the real cost of generation and supply would settle at the economic point of being sustainable. This point may disappoint those that are building reputations on driving prices down, and that the market is doing as it is expected to do – show maturity of the design.

So, it is time to move on and change the model of the market? Wintelboff and CO2Land org are seeing the Australian Electricity Market and the rules are in itself bringing about change, and there is further evidence most participants in the market are not prepared for the changes. Most of the difficulties are not the will to change by the participants, but more likely to be the extent of the systems required and needed to bring about the change.

Consider that it is now clearly the market is in two different tranches, and when you last went to market the electricity market described itself as contestable down to 160MWh pa consumption, and then below that effectively you were termed domestic and regulated at a set price or reset by regulatory pricing structures and determinations. It was also much easier when you could use the meter type as the rule for whether you contested on price or sought a discount on your tariff with the incumbent retailers. The incumbent was usually your network company and default retailer.

This time around you are either on an agreed price to pay for energy as a contract rate above the threshold of 160MWh pa or seek a discount on tariff set by regulation under the rules of as a small business enterprise (called SME) from 100MWh pa. In the latter a retailer licenced to sell energy might offer aggregation of sites to a contestable size or elect to do nothing other than offer tariff rates.

Another assumption that can be dangerous is to assume as a contestable site the retailer/supplier has an association with the network service provider/utility that will work to your benefit. Changes from within the system in all likelihood  means we can no longer ring our loyal and trusted friend and say can we fix this on one side of the ring-fenced entity or the other and have the problem resolved to mutual satisfaction.  It is now a detailed process. To get a result usually you need to address what they call the asset on a project basis, and computer says yes for you to proceed. If you have previously watched the TV series ‘Little Britain’ you will understand that statement rings very true.

Pursuing sustainable outcomes too brings new awareness, and innovation and the introduction of technology would be assessed according to the business case. Where you are showing success at getting a good price for your energy it can undermine the business case for the sustainable outcome. Especially where carbon pricing is needed to level the playing field. If you have been following that approach you will be seeing with the Feed In Tariffs (FIT) and other incentives being distorted as a political whim that only brings uncertainty to the project, and uncertainty has a cost.

On the point of whims, carbon continues to be a problematic area and the federal Energy Reduction Fund (ERF) is still very much without detail other than a benchmark carbon price will be set by government as government dictates and that price can change when the government decides to do so at its whim. The assumption to be made is that either you or those that you invite onto your agreement might be liable entities under that rules and impact your outcomes.

If we are attempting to bridge the needs of Energy as strategic, tactical and operational, and we describe this as Energy Management, Transition Strategies, and Savings – the need for individual assessment is more important than ever before. Yet, most competitive services are tending to be web based and call centres. This is hardly adequate when you desire to be an energy efficiency centre.  That sort of work requires a fuller understanding of the needs, other than a checklist and dubious interpretation of guidelines according to the level of training or programing of the robot. As a sustainable approach it is likely changes to the energy needs over the life of the agreement is being sought, and that is more than price.  Another way of looking at that point is in medical practice the prognosis will be accessed as preventative (price gained now) or diagnostic (what is the best course of action). A good example can be taken as: You want to introduce solar technology, and you need to know what penalties are written in the contract and will a standard form contract be sufficient to cover this off sufficiently well. LED is another very interesting technology as it can negate the need for conventional building management systems entirely, and that could have long-term upstream effects on current contracts and relationships for tenants and landlords and building managers.

We must take into consideration the balance in terms of energy supply and demand, and the responses must relate to multiples of price, network and security, and even emergency responses. The later because increasing in frequency is disaster.