The federal and NSW state government have announced a $102 million plan aimed at improving the technology underpinning Australia’s power grid, in an effort to reduce power prices for small businesses and provide additional protection from blackouts.
Unveiled Monday, Prime Minister Scott Morrison said the partnership with Gladys Berejiklian’s government will underwrite an upgrade of the NSW-Queensland Interconnector (QNI), enabling work on the project to be fast-tracked.
The project, alongside upgrades to the Victoria-NSW Interconnector, was outlined as high priority by the Australian Energy Market Operator (AEMO) in 2018, and comes ahead of the planned closure of the coal-fired Liddell power station in 2023.
“This is about putting downward pressure on wholesale prices to make sure businesses and households have access to reliable and affordable power,” Morrison said in a statement circulated Monday.
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“Industry needs certainty. They need to know their electricity won’t cut out, and their power bill won’t suddenly double. You can’t run a business like that, and you can’t employ people.”
The announcement is the latest in a line of recent investments from the federal government targeting lower power prices, although it has been argued efforts to date have not made much of a difference.
“We don’t know yet”
Council of Small Businesses of Australia (COSBOA) chief executive Peter Strong welcomed additional government intervention, but said it’s still too early to tell whether government efforts to reduce power prices are working.
“It’s good to see they’re putting something out there, it will be good to see how it will work,” Strong tells SmartCompany.
“Intervention is needed, whether this is the right form, well, we don’t know yet.”
Rising power bills have been identified as a growing issue across the small business community, particularly in sectors that rely heavily on electricity consumption.
The Prime Minister said the most recent plan, which will see both governments share underwriting liability in a 50-50 split, will enable network service provider TransGrid to fast-track early works on the QNI project, before the Australian Energy Regulator (AER) finalises its cost-benefit analysis.
The QNI grid upgrade is predicted to expand transmission capacity from Queensland into NSW by 190MW, while the Victorian-NSW project is slated to prove an additional 170MW, which Minister for Energy and Emissions Reduction Angus Taylor claimed will put downward pressure on wholesale prices.
The interconnector upgrade projects are together predicted to deliver up to 360MW of additional supply in NSW during times of peak demand.
“The QNI upgrade will facilitate greater competition between generators in the electricity market, helping to reduce wholesale prices,” Taylor said in a statement circulated by the Prime Minister’s office on Monday.
In a 2018 report, the AEMO outlined an increase in transfer capacity between the states of 378MW would boost reliability ahead of the 2023 Liddell closure.
Wholesale and retail reforms
The grid upgrades fall within the government’s promise to oversee a 25% reduction in the average National Electricity Market (NEM) wholesale spot price by the end of 2021, although prices have been forecast to decrease anyway for some time.
Separately, 12 energy generation projects are slated to be underwritten by the federal government in a bid to increase the actual supply of electricity into the wholesale market, although the investment is still being finalised and would support projects with lengthy construction timeframes.
Wholesale prices comprise between 30-40% of a typical retail electricity bill, according to AEMO figures, meaning efforts to reduce wholesale prices address a sizable, but not complete, part of business power bills.
Earlier this year, Taylor targeted a suite of retail-side reforms intended to address information asymmetry issues for small businesses and make it easier for entrepreneurs to work out how much they’re paying compared to others.
In partnership with consultancy AlphaBeta, accounting firm Xero and energy comparison website Make It Cheaper, the federal government launched an online small business energy comparison service earlier this year.
That service, which has now been live for several months, has been collecting data on small business power bills and is expected to report back with insights about what further retail reforms may be necessary.
Industry gets busy on power prices
Meanwhile, Strong says industry groups are getting on with trying to address the issue of rising power prices themselves, meeting directly with companies such as Energy Australia in recent months.
“Some businesses are managing [power prices] better, because they’re working with the energy companies,” Strong says.
Power companies are increasingly taking a sector-by-sector approach to identifying issues where small businesses might not be getting the best deal, or may benefit from a new set of circumstances, Strong says.
Independent supermarkets and service stations are taking part in the discussions, which aim to identify areas where small businesses could improve their energy use practices.