While electricity molecules are the same no matter whether they come, from coal-burning generators, hydro or wind, the source of the product brings quality variations.
Hydro facilities are particularly valuable electricity because their power can be turned on and off when needed.
But hydro can run short of water, its basic fuel.
Coal plants are less flexible and are generally valued less than hydro in terms of output.
Valued below these conventional energy sources are wind and other forms of power that depend on the weather.
Within this solar category, photovoltaic panels, normally placed on roofs, are the least valuable. They are even more expensive than wind. Their excessive cost would not matter if people chose to buy them notwithstanding the premium energy price they entail.
For some people such purchasing decisions may stem from mistaken beliefs that because their energy source is free, photovoltaics offer cheap electricity. Some may be engaging in ostentatious buying behaviour to demonstrate a moral vanity in helping abate greenhouse emissions.
Photovoltaic cells are supported by government subsidies even more intensely than other exotic renewables. Already they receive the subsidy from the Commonwealth or State Government, which forces consumers to pay double the price for the electricity they generate. There is also a Commonwealth installation subsidy of up to $8000.
Now the Victorian Government wants a further subsidy. It wants a government agency to determine a "fair" price for power that is sold back into the grid from photovoltaics. Victoria's market for energy sales and purchases is perhaps the world's most competitive. Competitive supply and demand defines "fair" in any system. The lobby groups pushing for this form of energy want yet another subsidy. And the Government will vest new powers in a price-setting bureaucracy to bring this about.
The present subsidies to photovoltaics are bad enough. The Commonwealth's up-front financial support just means dudding the taxpayer.
The additional existing support by the Commonwealth Government and State Government that requires retailers to include a share of solar energy in their supply mix is akin to forcing Vic Market fruiterers to incorporate a share of high-cost, poor-quality strawberries in every punnet. It is now being proposed that the fruiterer buy the poor-quality strawberries at an even higher "fair" price.
The hope in applying this policy to electricity is that the costs will get smeared so consumers do not notice them or, better still, the retailers will absorb them.
But companies cannot and will not absorb the costs. They will pass them on to consumers or even try to avoid them. New entrants in the market -- those other than TRU, Origin and AGL -- will be especially keen to do this and thereby gain a competitive advantage.
Major new entrants will go to considerable lengths to avoid photovoltaics. Smaller entrants will also find it daunting.
The outcome, aside from yet another cost foisted on the Victorian electricity industry and its customers, is a market distortion and a disincentive for new entrants. In the old days with an integrated supply industry, such measures could be and were introduced willy-nilly.
They still are in those overseas jurisdictions in which there is little competition. But, to Victoria's great benefit, we have moved to a private and highly competitive market.
The Bracks Government has made much of its deregulation initiatives. The first feature of its National Reform Initiative called for "further developing the competitiveness of Australian business by ... reducing red tape and building world-class economic infrastructure". Unfortunately, such lofty words are all too often accompanied by actions like the Energy Legislation Amendment Act, which take us in the opposite direction.
The proposal is only the latest measure under which the Government has been pegging back the ability of the electricity industry to operate in an unregulated manner. And it comes at a time of market turbulence from the drought and greenhouse concerns.
Far better that the Bracks Government abide by its regulation review strictures and allow the energy industry to continue to offer the excellent service and low prices that have benefited consumers and businesses alike.
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