Reforms needed to stave off electricity ‘death spiral’
Author: Financial Review Date Posted:17 October 2014
Paying per kilowatt hour of electricity consumed sounds reasonable but it is unfair because it ignores the fact that the main cost for networks is not total power consumed but how much is consumed at peak times. Photo: Paul Jones
GEOFF WINESTOCK
It was a few years ago that economists at AGL Energy started talking about a “death spiral” for the roughly $100 billion Australia has invested in its electricity networks.
The idea was that as consumers generate their own power from solar panels and supplement this at night with battery storage, they will opt out of the national power grid completely.
That might sound like a green dream of self-reliance but the economists, led by Paul Simshauser, pointed out the problem for the customers who cannot generate their own power.
The network companies will have to charge these remaining customers higher prices for the cost of maintaining what will still be a very large grid. Higher prices in turn will drive more people to unhook from mains power. This is the death spiral.
The consensus is that the problem is real but rather long term and not too hard to avoid. Still, given the very long time frame for investment in power networks, reforms are needed soon.
