The ACT Government has been boasting for years about its renewables credentials, describing itself as “a nation-leader” in renewable energy, and by others as the first major jurisdiction in the world to move to 100 per cent renewable energy.
The ACT legislated a net 100 per cent renewable energy target in 2016, committing to purchase renewable energy across the National Electricity Market equivalent to the amount of energy it consumed. To great self-generated fanfare it completed this contracting of renewables in 2019 through a series of contracts for difference. The ACT government offered a fixed price per megawatt hour to the successful renewable project and then paid (or banked) the difference with the spot wholesale price of electricity.
Now the bill is coming in for this renewables grandstanding. And it’s big. The ACT already had the most expensive retail electricity bills in the country, but the flow on effect of the ACT’s policy is now coming home to roost: it will increase residential bills next year by another $300 per ACT household.
This kind of cost might be defensible if the ACT was actually leading the world on renewables. That means pioneering the technical challenges of integrating large scale intermittent renewables to power its electricity grid.
Except it isn’t. The ACT doesn’t actually have an independent electricity system. Just as Canberra is a political construct, created because Sydney and Melbourne couldn’t agree which one should be the capital after Federation, so the ACT was just a small political territory carved out of south-western NSW.
While each state created its own independent electricity system, the ACT is enmeshed inside the NSW grid. From an operational electricity perspective it’s more like a giant council than a separate electricity system.
Holding aide the long-standing use of renewable hydro electricity in countries like Brazil, Canada, Austria and Scandinavia, the really big technical challenge in decarbonising electricity systems is making grids based on large scale, intermittent generators like wind and solar work at scale.
In this regard South Australia is, quite by accident, the world leader. Hydro Tasmania has been running a live big renewables trial grid on King Island in Bass Strait for years, while, small remote systems like Coober Pedy in South Australia and Alice Springs are discovering, sometimes the hard way, the cost and technical challenges of making intermittent renewables work.
But the ACT has tackled no technical challenges to make its 100 per cent renewables claim. It’s only made a net 100 per cent target and then written a lot of generous contracts to renewable projects. And then issued a lot of media releases.
This means the ACT still runs mostly on coal fired electricity like the rest of NSW, it’s just that there are more renewable projects generating electricity in South Australia, Victoria and NSW as a result of the ACT Government’s “lowest cost” reverse auctions of renewables supply. The ACT ‘s actions do reduce emissions by the net amount of increased zero emissions generation, but it also simply transfers the technical challenges of integrating these projects to other states. All care, no responsibility.
According to the national review of retail electricity costs by the Australian Energy Market Commission (AEMC), the ACT already had the highest retail power bills the country. This week the cost just got higher when network charges for 2021-22 were scheduled to increase by 40 per cent.
The reason is renewables. As it turns out, the ACT’s contracting wasn’t as clever as it claimed. Plummeting wholesale electricity prices, driven by continued building of renewables projects, has meant the ACT Government will have to pay out $153 million to its renewable generators – the difference between their original strike price and the current wholesale price.
The ACT Government has also elected to voluntarily surrender the large scale Renewable Energy Certificates (RECs) created from its projects. This means it is not taking money from the federal government RET scheme subsidy, further increasing the cost to ACT residents.
It also sustains the REC price, which makes building renewables more attractive to developers. More renewables means softer wholesale electricity prices, which means ACT residents can expect to be paying the difference on the ACT government’s generous contracts for years to come.