Australia confronts "tidal wave" of new renewables supply
Up to 70,000GW of renewable energy supply is expected to be added to Australia's National Electricity Market (NEM) by 2025, hastening the unviability of gas and coal power plants.
Between three and five of the remaining 15 coal power stations in the NEM will be under financial stress by 2025.
The warning is sounded in a new report from the Institute for Energy Economics and Financial Analysis (IEEFA) and Green Energy Markets.
The new wind and solar plants coming on stream equate to New South Wales’ entire electricity consumption.
"The market is facing a tidal wave of new supply, much greater than anything government authorities or market analysts forecast or even contemplated just two years ago," said Tristan Edis. "The supply added from 2018 to 2025 equates to over a third of the entire demand in the NEM, and more than 8 times the annual generation of the Liddell coal-fired power station in NSW."
Coal plants will be financially unviable and at least one is likely to face closure several years sooner than planned due to their poor flexibility and inability to adapt to a rapid influx of renewable energy.
"Rather than propping up these plants which are getting very old, we need new government policies that supports private-sector investment in dispatchable power plants that will be viable over the long term," writes Edis. "To be viable they need to be highly flexible to work around changes in wind and solar output. And they need to be low emission if we are to deliver on our climate change obligations."
Co-author Bowyer notes this extra supply will lead to a collapse in output from many of the existing fossil fuel generators.
"They will be displaced because wind and solar have no fuel cost and typically bid into the market with prices close to zero,” says Bowyer. "We predict that gas power station output will fall by 78% and coal output by 28% by 2025 compared to 2018 levels."
The extra competition from wind and solar plants will also have a deflationary impact on wholesale electricity prices, as more expensive gas and coal generators will be needed far less, the report adds.
While prices will be more volatile, on average they are likely to return back to the kinds of levels that prevailed in 2015. "This is because the extra supply from renewables is several times greater than that lost from the closure of Hazelwood, Northern and Liddell Power Stations."
Ofwat allows retailers to raise prices from April
Retailers can recover a portion of excess bad debt by temporarily increasing prices from April 2022, according to an Ofwat statement.
The regulator confirmed its view that levels of bad debt costs across the business retail market are exceeding 2% of non-household revenue, thereby allowing "a temporary increase" in the maximum prices. Adjustments to price caps will apply for a minimum of two years to reduce the step changes in price that customers might experience.
Measures introduced since March 2020 to contain the spread of Covid-19 could lead to retailers facing higher levels of customer bad debt. Retailers’ abilities to respond to this are expected to be constrained by Ofwat strengthening protections for non-household customers during Covid-19 and the presence of price caps.
In April last year, Ofwat committed to provide additional regulatory protection if bad debt costs across the market exceeded 2% of non-household revenue.
Georgina Mills, Business Retail Market Director at Ofwat said: “These decisions aim to protect the interests of non-household customers in the short and longer term, including from the risk of systemic Retailer failure as the business retail market continues to feel the impacts of COVID-19. By implementing market-wide adjustments to price caps, we aim to minimise any additional costs for customers in the shorter term by promoting efficiency and supporting competition.”
There are also three areas where Ofwat has not reached definitive conclusions and is seeking further evidence and views from stakeholders:
- Pooling excess bad debt costs – Ofwat proposes that the recovery of excess bad debt costs is pooled across all non-household customers, via a uniform uplift to price caps.
- Keeping open the option of not pursuing a true up – For example if outturn bad debt costs are not materially higher than the 2% threshold.
- Undertaking the true up – If a 'true up' is required, Ofwat has set out how it expects this to work in practice.
Further consultation on the proposed adjustments to REC price caps can be expected by December.
"While it’s great that regulators are helping the industry deal with bad debt in the wake of the pandemic, raising prices only treats the symptoms. Instead, water companies should head upstream, using customer data to identify and rectify the causes of bad debt, stop it at source and help prevent it from occurring in the first place," she said.
"While recouping costs is a must, water companies shouldn’t just rely on the regulator. Data can help companies segment customers, identify and assist customers that are struggling financially, avoiding penalising the entire customer in tackling the cause of the issue."
United Utilities picks up pipeline award
A race-against-time plumbing job to connect four huge water pipes into the large Haweswater Aqueduct in Cumbria saw United Utilities awarded Utility Project of the Year by Pipeline Industries Guild.
The Hallbank project, near Kendal, was completed within a tight eight-day deadline, in a storm and during the second COVID lockdown last November – and with three hours to spare. Principal construction manager John Dawson said the project helped boost the resilience of water supplies across the North West.
“I think what made us stand out was the scale, the use of future technology and the fact that we were really just one team, working collaboratively for a common goal," he said.
Camus Energy secures $16m funding
Camus Energy, which provides advanced grid management technology, has secured $16 million in a Series A round, led by Park West Asset Management and joined by Congruent Ventures, Wave Capital and other investors, including an investor-owned utility. Camus will leverage the operating capital to expand its grid management software platform to meet growing demand from utilities across North America.
As local utilities look to save money and increase their use of clean energy by tapping into low-cost and low-carbon local resources, Camus' grid management platform provides connectivity between the utility's operations team, its grid-connected equipment and customer devices.