Global Insights: 17th July 2018

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Global Insights: 17th July 2018


ACCC report recommends extensive changes to the NEM

The Australian Competition and Consumer Commission (ACCC) have released a report this week on retail pricing in the National Electricity Market (NEM).  The report recognises that competition in the NEM is not working and that the current approach to policy, regulatory design and promotion of competition is not working in the best interests for consumers.  The report has 56 recommendations around four broad areas:

  1. Boosting competition in generation and retail
  2. Lowering costs in networks, environmental schemes and retail
  3. Enhancing consumer experiences and outcomes
  4. Improving business outcomes.


The report has been welcomed by Energy Consumers Australia (ECA) whose recent Consumer Sentiment Survey found that only 21% of consumers felt that the energy market was not working in their favour.  The ECA stated that bringing together the recommendations from the ACCC report, the Finkel Blueprint, the new National Energy Guarantee (finalised in Aug 2018) and working with the State Governments could create a plan to regain consumer trust and confidence.

Tesla VPP trial a success

Tesla’s virtual power plant (VPP) trial in South Australia (SA) has been hailed a success as groups of small scale batteries in residential homes were able to deliver much of the same services as the Tesla ‘big battery’ in the state. The trial, which after its final phase, would be the biggest VPP in the world.  The grouped batteries were able to deliver frequency services and increase electricity supply during peak periods adding to the stability and reliability of the grid.

The initial trial installed 5kW of rooftop solar and a 15.3kWh Tesla Powerwall battery on 100 housing association homes in SA.  This trial is the first stage which will see another 1000 homes with solar and batteries installed in the second stage.  The original trial was then to extend this to a total of 50,000 homes in a third stage.  However, after a recent change of government it is expected that this will change to the election promise of $100m of grants towards domestic battery storage, an estimated 40,000 homes.  The new government has still shown an interest in the Tesla proposal and is also interested in other battery companies such as Sonnen and is promising that SA will still lead the way in renewable energy transformation.


NY Energy Efficiency

The Acadia Center provides progress reports on US States in relation to clean energy targets. Its latest report is on Assessing NY State’s Energy Efficiency track record, and recommendations for its future. There have been questions whether the NY REV is complementary to energy efficiency improvement. But this report shows that whilst on the whole energy efficiency policy is implemented via various State policies, the NY PSC (the regulatory office) is able to input complementary regulatory incentives. Overall though, NY – whilst ok on average across the US – is not currently as energy efficient as its neighbours; its energy efficiency outcomes, so far,  have not been as transformational as its ideas about regulation; but this report sets out how NY can catch up with the best performing EE states whilst also maintaining its transformation energy system change program.


A new 2050 energy and climate strategy for Europe – but will the potential contribution of energy savings be correctly calculated?

New legislation in the European Parliament means that the Commission must come up with a climate and energy plan for 2050 by next year, with the COP24 in December 2019 as a possible launch–pad for the strategy. As the process kicks off, the European Alliance to Save Energy has intervened to argue that the potential role of energy efficiency in a long term strategy is currently undervalued by the Commission because it uses too high a discount rate. In the modelling used by the Commission to develop energy and climate policy, a rate of 10% is used, which is a lot higher than the average rate of 5.7% used for public planning across EU members. Using this latter discount factor makes much more ambitious emissions reductions targets cost effective.

German coal phase-out commission starts work

After an initial procedural session in June, Germany’s coal exit commission met last week to discuss the priorities and necessary ground work to develop a joint understanding across the 24 expert members and four commission heads. The commission heard presentations on the economic situation and climate impacts of coal in Germany, together with a report on coal use in the European Union. Later in July working groups on ‘energy economy and climate targets’ and ‘economic development and jobs in the region’ will follow and in the Autumn the commission will hold meetings in German lignite-mining regions. The main meeting dates of the coal commission can be found on the Clean Energy Wire calendar.

No date for additional solar and onshore wind power auctions in Germany

The German government’s coalition treaty committed to organising additional auctions for a combined 4GW of onshore wind and solar capacity in 2019 and 2020. However despite calls from the Greens and SPD for the specific date of the special auctions to be set the federal minister for economic affairs and energy has so far refused to specify a date, stating that the power grid capacity must first be increased. 


Global Renewable Energy Investment Rises in 2nd Quarter of 2018

The latest investment assessment by Bloomberg New Energy Finance (BNEF) notes that in 2018, in the 1st quarter investment in clean energy was $61.5 billion and it rose to $76.7 billion in the second quarter.  This increase was driven by stronger activity in the U.S. and, to some extent, Europe.  During  2017 investment was $279.6 billion.   The figures for the first half of 2018 shows solar investment down 19% compared to the same period last year at $71.6 billion, with wind up 33% at $57.2 billion.  The fall in solar, was a reflection of the slowdown in China where investment was down nearly a third compared to 2017, to $35.1 billion, as a result of changes in Government support.   Overall Chinese investment in clean energy fell by 15 percent to $58.1 billion.

The main success stories, so far in 2018, is the U.S. wind sector which was up, compared to 2017, by 120% to $17.5 billion.  In India investment increased by 22% in the first half of 2018 compared to the same period last year, to $7.4 billion.

EV Manufacturers Moving East ?

Tesla has announced that it is going to open a new operation near Shanghai. This is the first time that they have opening a manufacturing base outside of the US, which may eventually exceed production from the California factory.

Tesla’s Chinese investment is driven by two factors.  Firstly, the start of the trade war with the US and the subsequent rise in import tariffs on cars, leading to a 70% rise in the cost to Chinese consumers, and the lifting of rules on the capping of foreign ownership of new-energy vehicle ventures.

However, it is also a reflection of the potentially massive Asian market. More than 28 million vehicles were sold in China in 2017 with sales expected to meet 35 million by mid next decade.   The US market for new cars is about 17 million vehicles a year.  While air-pollution concerns and industrial strategy is already leading to China being the largest deployer of EVs.  The Chinese Government has also recently announced a change in its consumer subsidy programme, to encourage the development of vehicles with longer range; those under 150 km will no longer receive financial assistance while those with over 400 km capabilities will get additional assistance.  While the State Grid of China has announced that it is planning to put in place 120,000 public charging stations for electric cars by 2020.

Tesla is the latest car manufacture to set up part of its operation in China, with both BMW and Volkswagen also announcing joint projects for the development of EVs and driverless vehicles.    German car manufactures are global leaders in EV investment with announcements to date of $52 billion followed by Chinese $21 billion and the US $19 billion.

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