Market intervention retrograde

The Victorian Government’s direction to the market operator to develop a large-scale battery in Geelong without independent regulatory scrutiny of costs and benefits or clarity of how it will participate in the energy market, is a bad idea, according to the Australian Energy Council.

The AEC’s Chief Executive, Sarah McNamara, said it is unclear how costs will be passed on to end users, or if any detailed cost-benefit analysis has been undertaken.

“The AEC supports private investment in response to market signals, however this battery will be funded by Victorian consumers whether or not it proves useful. It is being developed under new legislation that allows the Victorian Minister to direct such developments outside the national planning and regulatory framework. It will also impact private investment decisions made in good faith within that framework.

“Every decision like this unavoidably affects market investments so careful individual assessments should be carried out at arms-length from political decisions.

“This is critical to ensure not just the timing, but also the cost-effectiveness for customers who have to pay for new investments, as well as providing a predictable framework for generation investors. This is why we do not support the Victorian approach.” Ms McNamara said.

“While it is clear this battery will participate in the energy market, it is not clear who will make decisions on when or how it will be used, which will unavoidably affect other market participants.”

The Australian Energy Market Operator has neither identified a shortfall in Victorian supply for 2021-22, nor has it identified a need for this battery in its national Integrated System Plan.

About the Australian Energy Council

The Council represents 21 major electricity and downstream natural gas businesses operating in the competitive wholesale and retail energy markets. These businesses collectively generate the overwhelming majority of electricity in Australia, sell gas and electricity to over 10 million homes and businesses, and are major investors in renewable energy generation.