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Speaker 1: Let's talk about electricity pricing at twenty seven to ten

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Speaker 1: on five double A because the Australian Energy Regulator's latest

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Speaker 1: wholesale market quarterly report shows wholesale electricity and gas prices

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Speaker 1: went up in the last quarter compared to the quarter before.

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Speaker 1: What does that mean for our power bills long term?

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Speaker 1: Because it does take a while for this to feed

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Speaker 1: through to retailers passing on costs. Professor Bruce Mountain, Director

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Speaker 1: Victorian Energy Policy Center, Bruce good morning, Hi, Hi, so okay.

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Speaker 1: Rise in wholesale prices. How long before that is reflected

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Speaker 1: will it be reflected in our electricity gas bills?

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Speaker 2: So the trend that we've seen in wholesale spot electricity markets,

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Speaker 2: which are the short term markets where all of the

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Speaker 2: power is actually traded, since twenty twenty two, we've seen

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Speaker 2: a marked decline, partly as a consequence of much less

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Speaker 2: impact of international coal and gas prices and also increase

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Speaker 2: in penetration of wind and solar. In the most recent

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Speaker 2: few months, however, we have seen much greater tightening in

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Speaker 2: all the regional markets in South Australia, less so than

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Speaker 2: in the other states, but nonetheless a tightening. And that's

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Speaker 2: been seen essentially partly as a consequence of coal generators outages,

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Speaker 2: which is withdrawal capacity, but partly also usually fairly predictable

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Speaker 2: wind and solar shortfalls, which can extend in the case

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Speaker 2: of wind shortfalls for days and then when you don't

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Speaker 2: have the wind and sun you need to call on

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Speaker 2: coal gas and that's had a short term spike in

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Speaker 2: the spot markets. The way those flow through into wholesale

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Speaker 2: markets is not at all obvious. The wholesale market is

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Speaker 2: a way to swap the volatile short term spot market

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Speaker 2: spot prices for fixed prices, but it is essentially a

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Speaker 2: better against those future spot prices and people that have

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Speaker 2: a range of views on those bets, so I think

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Speaker 2: in principle it ought to be a fairly short term effect.

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Speaker 2: Although there are underlying upward pressures, what are they? Well,

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Speaker 2: the underlying upward pressure, this is the real This is

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Speaker 2: the real difficulty. Underlying all of this is the wind

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Speaker 2: and sun when it's available, has no cost as long

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Speaker 2: as it can produce because the wind sun is free

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Speaker 2: to use, and so those operators will offer their power

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Speaker 2: into the market at a price pretty close to zero,

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Speaker 2: often even less than zero, because they get credits for

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Speaker 2: the green energy that they actually produce. So that means

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Speaker 2: the spot price can be zero or negative, and these

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Speaker 2: generators are still either making a profit or not actually

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Speaker 2: making loss. And so you can get these short term

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Speaker 2: very cheap, but you don't attract investment when you get

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Speaker 2: those very low prices, and so someone needs to pay

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Speaker 2: for the investment elsewhere in order to expand production in

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Speaker 2: order to displace the variable cost production either coal or gas,

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Speaker 2: which is much more expensive. So this is the underlying

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Speaker 2: tension in our minds.

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Speaker 1: Okay, the credits that they get, I presume from the

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Speaker 1: tax payer.

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Speaker 2: No, actually they are funded by consumers. This is a

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Speaker 2: scheme which runs out in twenty thirty and the cost

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Speaker 2: essentially gets passed back to the retailers, and the retailers

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Speaker 2: then charge it on to their customers.

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Speaker 1: So we're paying for it one way or another.

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Speaker 2: Yes, yes we are. I mean there's a fair argument

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Speaker 2: that a fair bit of those green energy credits have

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Speaker 2: effectively been paid for through the price reductions and the

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Speaker 2: wholesale market the same reason that we're talking now, we

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Speaker 2: haven't had the same reduction because there's been less wind

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Speaker 2: and so than colon gas plants those that same investment

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Speaker 2: that cost has brought on the wind and sun, which

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Speaker 2: has given us the price relily.

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Speaker 1: So if I've got it straight, the suppliers get a

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Speaker 1: credit when it's sunny and windy for generating solar and

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Speaker 1: wind power, and we get charted because it's free. They

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Speaker 1: make nothing on it, but we still pay them for

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Speaker 1: making nothing on it.

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Speaker 2: Yes, that's right, that's right. I think in the wholesale

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Speaker 2: market it's a very complex thing and no one can

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Speaker 2: know for sure. But in the wholesale market when you

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Speaker 2: get the abundant wind and sun and prices are zero

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Speaker 2: or minus up to minus thirty forty dollars and they're

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Speaker 2: god are I think at those times quite evidently the

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Speaker 2: policy is paying for itself and customers can get advantage

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Speaker 2: from that. I'm one, I charge my ev between eleven

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Speaker 2: in the morning and two in the afternoon, and I've

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Speaker 2: paid nothing for it, and I pay nothing for it,

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Speaker 2: and it's a free offer from my energy retailer, because

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Speaker 2: my energy retailer is likely facing a negative price, are

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Speaker 2: either getting paid to consume electricity at third time, so

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Speaker 2: customers can benefit from it. But obviously the wind and

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Speaker 2: solar producers would have no incentive to build capacity if

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Speaker 2: they knew that that was the price that they were

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Speaker 2: going to get, and so there's a mechanism outside the

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Speaker 2: market to compensate them. So in properly understanding electricity prices,

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Speaker 2: you need to account for all of these effects.

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Speaker 1: And there's so many different things, isn't there so many

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Speaker 1: different components like that that have got to be taken

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Speaker 1: into account. You need a you need an Einstein to

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Speaker 1: get on top of this, and maybe you are, but

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Speaker 1: you certainly there's so much too it just drives you

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Speaker 1: insane trying to work it out.

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Speaker 2: Yeah, that's right, And I mean this is obviously my field,

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Speaker 2: and I've been here for decades, but I'm hum I

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Speaker 2: can't know for sure. I can point to the factor

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Speaker 2: and I can say this all sets that, but we

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Speaker 2: just can't know. It is not notable exactly how profitable

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Speaker 2: or not these new investments are. But I can point

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Speaker 2: to the information that you need to account for in

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Speaker 2: properly describing the market and probably figuring out whether a

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Speaker 2: policy is likely to be working or not.

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Speaker 1: Okay, can I ask you about something in the media

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Speaker 1: release that the Energy regulator has put out. It's the

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Speaker 1: last paragraph. I don't know if you've got it in

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Speaker 1: front of you, but it says one new wind generator

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Speaker 1: in South Australia entered the market this quarter and will

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Speaker 1: contribute two hundred and one megawatts when fully commissioned. One

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Speaker 1: new generator. Does that mean one turbine or one company

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Speaker 1: providing wind power with lots of generations.

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Speaker 2: It'll likely be if we assume an average turbine side

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Speaker 2: of three and a half megawatts, it'll likely be around

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Speaker 2: sixty okay, turbines, right, so it'll be a new station, Okay,

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Speaker 2: and that's a pretty large farm as it goes.

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Speaker 1: Okay, So somewhere in the state we've got sixty new

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Speaker 1: around sixty new turbines doing their thing. Yeah, okay, So

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Speaker 1: and look, all of that helps and has its place,

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Speaker 1: But people are concerned about the landscape, about what we're

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Speaker 1: doing to the countryside when farms everywhere, solar farms everywhere.

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Speaker 1: What about agriculture a lot of it in prime land,

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Speaker 1: particularly interstate in the eastern coast New South Wales copping

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Speaker 1: quite a few solar farms going in or that's the

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Speaker 1: plan at least, and concern about food bowls and everything else.

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Speaker 1: So are we doing this right, do you think.

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Speaker 2: On balance, I don't think so. I think it's unnecessary

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Speaker 2: to be utilizing farmland for farm solar. Rooftop solar is cheaper.

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Speaker 2: Often it's close to the point of use. Hustles and

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Speaker 2: businesses are happy to satisfy, and I think there's a

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Speaker 2: great deal governments can do to meet the clean energy

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Speaker 2: supply police from solar by using rooftop. I do think

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Speaker 2: some wind farms are needed, and I think some are acceptable.

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Speaker 2: In some cases, farmers and local land users are happy

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Speaker 2: to to you know, to actually have them. They can

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Speaker 2: farm to various degrees. When they put on the top

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Speaker 2: of ridges on you know, mountain lions at their areas

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Speaker 2: where they have impact on bird population, it's a terrible thing,

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Speaker 2: and that's wasteful, and a whole lover of the wind

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Speaker 2: farm can have a hugely negative impact on the need

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Speaker 2: for new power lines. But it needn't be that way.

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Speaker 2: And if policy makers were more sensitive to finding a

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Speaker 2: combination of policies that achieve these objectives by treading on

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Speaker 2: the land more likely and making better use of city powers,

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Speaker 2: I think we can get there. But I'm afraid there's

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Speaker 2: a great there's a great stubbornness. In a lot of

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Speaker 2: policy land, it's it's seen as a yes snow issue

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Speaker 2: and people line up on it and it's just not constructive.

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Speaker 2: So I think there are many areas that have.

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Speaker 1: Been made interesting. Bruce. Appreciate your insights as always. Thank you,

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Speaker 1: super thank you. Professor Bruce Mountain, Director of Victorian Energy

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Speaker 1: Policy Center,