Moving to Net Zero: the education sector still has much to learn.

In 2015, 190 countries signed the international treaty on climate change in Paris – the first ever legally binding global climate change agreement. Among the many commitments was a pledge to limit global warming to no more than 1.5°C. The Paris Accords recognised the urgency of dealing with the climate change crisis sooner rather than later, which is why it has been at the forefront of global political agendas ever since.

In Australia, while many large corporations and businesses have generally embraced the challenges, one area that, perhaps surprisingly, has not been as forward-thinking, is the education sector. As an  article in the Sustainability Journal says, “Despite the abundant environmental and social benefits, and the imperative to address rising emissions, utility consumption and costs, there has been mixed ambition and approaches from various levels of government in Australia to push quantifiable carbon reduction in schools1.”

This despite our school system being “the fifth largest emitter of Carbon Dioxide and Equivalent (CO2e), in energy alone, in Australia2,” according to not-for-profit emissions reduction program, Zero Positive. The Clean Energy Council suggests that, on average, school classrooms use around 3800 kWh of electricity per year, or roughly half the consumption of an average Aussie household3. Clearly, there is a disconnect between the enthusiasm of today’s school and university students for action on climate change and what’s actually happening in our school and university campuses.  

Room for improvement

When we consider the power needed to run multiple school and university buildings – classrooms, sports halls, dining rooms, dormitories, research labs and so on – it’s easy to see why energy consumption is high. Especially when many of the buildings are ageing and inefficient. Still, there is plenty of scope for improvement in terms of energy consumption and energy efficiency.

Rob Breur, CEO Solar schools, makes a simple observation: “Australians spend $876M a year on ‘standby’ energy, which contributes to 2.4M tonnes of CO2e. If ONE school turned their appliances off at the wall every night it would save, on average, $2,225 per school per month. If the 9,500 schools in Australia did that, it would reduce costs by $21M a month or $235M per annum. 4

Study shows a way forward

An article published in the Sustainability Journal1 entitled ‘Schools: An untapped Opportunity for a Carbon Neutral Future’ shows a way forward for educational establishments. The study involved 13 schools in Perth, WA, during a 2-year Low Carbon Schools Pilot Program (LCSPP). It looked at how schools can reduce their carbon emissions and operational costs on buildings and infrastructure. Data from electricity, gas and water was analysed, in conjunction with the initiatives each school implemented. Results revealed the schools participating were able to achieve:

The last number, in particular, demonstrates the simple benefit of action vs. inaction.

Act now to make an impact tomorrow

Energy Action has helped thousands of businesses, local councils, strata organisations and more transition to Net Zero. (We achieved Net Zero ourselves this year.) Energy Action has a five step process to help customers lower emissions.

STEP 1: Measure your usage and emissions: you can’t improve what you don’t measure.

STEP 2: Lower your costs: use the measured data to establish areas for improvement.

STEP 3: Consider your emission reduction options: match your appetite for renewables to your budget and timeline.

STEP 4: Procure at least-cost: let energy retailers, renewable energy producers and/or installers compete to win your business.

STEP 5: Manage: from contract fulfilment to certification management, Energy Action can help you secure the ongoing management of your energy.

Sources:

1. MDPI: ‘Schools: An untapped Opportunity for a Carbon Neutral Future’ Sustainability Journal 2021, 13, 46

2 & 4. zeropositive.org

3. Clean Energy Council: Renewable Energy Powering Australian Education

Australian Carbon Credit prices plummet in wake of European crisis.

Australian Carbon Credit Units have fallen for the first time in more than a year due to the uncertainty of the global energy markets. ​

On Wednesday 2nd March, the market closed for ACCUs at $47 per tonne. This is an almost 20% drop after ACCU's reached their all time high this past January.​

Graph showing an intense drop in European carbon prices. Source: BarChart

Leading carbon market experts suggest there were signs the Australian carbon credit market was starting to respond to the recent surge in offset prices in 2021, where they more than tripled.

We have also seen growing demand for locally generated carbon credits, as many corporations are searching for affordable means of offsetting their emissions as they work towards their Net Zero.​

In 2021, the general sentiment was that the market was falling short. We are now seeing increasing issuance to projects that are coming off ERF contracts and optional delivery contracts. ​

The significant uncertainty of today's global market has been triggered by the Russian invasion of Ukraine. This has seen energy prices spike around the world. It also means European emissions units have lost 30% of their value over the past two weeks. Market analysts speculate this is due to traders being forced to sell off their holdings in carbon units to cover the increased costs in energy.

What does this mean for the Australian market?

Although the fall in Australian carbon credit units has not been as pronounced as the fall in the European market, the facts are there. We are evidently seeing the lowest prices for ACCU's that we have seen in over a year.​

Now is the time to be purchasing Carbon Credits to take advantage of these low prices. The energy market is volatile and can change overnight, as we've seen with NEM wholesale prices due to the Eraring Closure last month. ​

Please get in touch with your Account Manager today to make the most of this sharp fall in Carbon Credits and reach your Net Zero goal at least cost.

Long Term Energy Service Agreements; Implications for the Market and Customers

In 2020 the New South Wales (NSW) Government published its Electricity Infrastructure Roadmap as a plan to transform its electricity system through coordination of investment in transmission, renewable generation, storage and firming infrastructure as ageing coal-fired generation plants retire.  Under the Roadmap, the NSW Government is aiming to construct a minimum of 12GW of renewable generation by 2029. A key component of the Roadmap includes running competitive tenders to offer a Long-Term Energy Services Agreement (LTESA) for renewable generation larger than 30MW, long-duration storage and firming.  It is likely that the first LTESA tender would be in 2022.

What are LTESAs?

The specific design of LTESAs is not yet finalised.  In August 2021 the NSW Government released a consultation paper with submissions due early September 2021. 

The LTESA is likely to be a 20-year energy option contract that gives renewable project developers optional access to a competitively set (via a tender process) fixed minimum price for their energy generated.  The LTESAs will bundle energy and renewable certificates.  These agreements are designed to provide longer term revenue assurance to help drive investment in new renewable projects.

The Government is considering the LTESA should include 10 options each of two years in duration granting the renewable project developer the right (but not the obligation) to exercise a swap arrangement (contract for difference) at the agreed fixed price for their energy.  Options would need to be exercised six months in advance of each two year period. 

So in practice, if the market price for energy is low, the developer can exercise the option and receive the fixed price swap for their energy for the two year period.  Conversely, if the market price is high, the developer would not need to exercise the option. 

The LTESAs also intend to include a repayment mechanism that applies in those two year periods when the options are not exercised.  In these periods it is intended that the renewable developer would share a proportion of the higher energy prices with the State and effectively ‘pay money back’ to compensate for money received during those periods where prices are lower.

What are the potential implications of LTESAs?

Some stakeholders have commented on the complexity and risks associated with the LTESAs potential design as well as queries if it will distort the energy markets.

The intention of the LTESA is most certainly to provide protection to renewable developers and investors against low energy prices but it is unclear if this will then necessarily mean consumers may be prevented from benefiting from these same low prices.  The ultimate outcome for NSW electricity consumers is unknown and will be dependent on electricity prices over the 20-year LTESA time horizon.

Given the LTESA is likely to be bundled and include renewable certificates such as Large Scale Generation Certificates (LGCs) they may adversely impact the availability of LGCs for voluntary surrender.  This may result in impacts on the future prices of LGCs and the costs for corporate customers to achieve their net zero ambitions.  Further consequences may also include setting a potential floor price for LGCs based on the fixed prices in the LTESAs.  

Over the longer term, the intention of the Roadmap and the LTESAs is to stimulate growth in renewables and decarbonisation of the electricity grid.  This should eventually reduce prices and diminish the need for voluntary surrender of renewable energy certificates.  However, consumers who currently enter long term obligations for renewable certificates via mechanisms such as corporate power purchase agreements may have unintended risks and consequences.

An alternative approach for consumers that may avoid these risks and consequences would be to consider shorter-term (two to five years) and more flexible products such as our renewable backed Energy Supply Agreement (RESA).  The RESA bundles standard electricity supply with the same flexibility and load as current agreements with voluntary LGCs from a nominated source for a forward term. 

Conclusions

Given the significant scale of the NSW Government’s ambitions, the LTESA will almost certainly have a significant influence on the liquidity and future prices of energy in NSW and potentially broader national energy markets. 

If you have any questions or need advice on procuring renewable energy for your business please contact your Energy Action account manager or contact us by clicking here

Understanding and Managing the Surge in Gas Prices

The worst of the seasonal spike in wholesale spot gas prices on the east coast appears to have passed. Having seen gas prices surge by 500% to above $50/GJ, many might be tempted to jump from wholesale to fixed-price contracts. We explore whether this is the right option and what other strategies can be considered. 

The competitiveness of some East Coast manufacturers and other large gas consumers that are exposed to wholesale spot prices was threatened by a surge in gas prices this winter. Both domestic and international supply and demand factors push spot prices to an intraday record high of $56/GJ.

These included:

Relief on the horizon

The issues at Longford, Yallourn and Callide’s generation units (other than the restoration of unit 4, which is scheduled for December 2022) have been resolved, and winter will shortly give way to spring. Some retracing of spot prices in Queensland and New South Wales was evident in July, and prices are beginning to settle around $10/GJ.

We regularly see negative pricing in the electricity market. This suggests that demand for gas-fired generation is already falling. High water storage levels at the Tasmanian and Snow Mountains hydroelectricity stations mean they can take the place of gas-fired generation. Barring any further disruption, both hub and contract gas pricing should decrease further in Q4 2021.

Short-term mitigants

While some large gas users will have faced above-budget invoices of late, the year-to-date average spot price is $7.70/GJ, and some significant users would have paid average rates closer to $5/GJ this year. This suggests wholesale gas customers are no worse off than those on fixed-price contracts from the beginning of the year.

Given our target for a year-end price of $7/GJ, we would therefore caution customers considering reacting to the market ructions by switching to fixed-price contracts that are currently being offered.

Instead, load shifting is one potential way to manage temporary price spikes. This will not work for businesses where the costs of deferring a shift or closing down production during peak gas pricing outweigh the gas savings.

Another option is to enter wholesale contracts with a price cap, whereby gas users pay a premium to ensure the price paid doesn’t exceed $8/GJ, for example. There are also hybrid contracts. These offer exposure to wholesale pricing while including a fixed price arrangement to provide more stable gas price outcomes. It is like fixing a portion of your home loan and leaving the balance on variable rates.

The long-term uptrend in electricity prices

The recent bout of volatility highlights the risks inherent in the wholesale market. Prices can quickly move up but take much longer to come down and rarely return to where they were previously. All the research we have seen, and our own modelling, underpins our belief that electricity prices remain in an upward trend.

Renewable generation remains the critical long-term influence over the spot electricity market amid continuing risk of further rationalisation in the baseload generation sector. Renewable generation projects will eventually need to recover their long-run marginal costs to ensure viable returns on equity and capital. This will place more significant upward pressure on electricity prices. Therefore, we continue to advocate that large users contract their electricity purchases to 2024 and consider 2025 pricing.

To discuss the best energy procurement strategy for your business, contact Energy Action on 1300 553 551 or contact us by clicking here.

Lowering Your Energy Costs Without Switching Providers

Keeping business costs down is critical to cash flow management and overall success – an increasing focus for many businesses navigating the latest lockdowns. Energy is one of those unavoidable expenses, but there are ways to create real savings without changing providers or even the amount you consume.

At Energy Action, two strategies we recommend to our clients are reviewing tariffs and validating energy bills to reduce energy costs. The network tariff is the charge for using the poles and wires that deliver the electricity to your business. Once a year, your business gets the chance to lock in substantial savings if they're eligible to move to a better network tariff.  

In addition, electricity bills are a given, but they are often complicated and include numerous charges and layers of jargon.

We support our Metrics clients by providing services that review network tariffs annually,  and we check our clients' invoices each month to identify savings. We have identified significant savings for our clients just by ensuring bills are accurately measuring and recording energy costs.

Are you on the right tariff?

Energy Action undertakes a Tariff Review for businesses to identify available savings by moving onto a more favourable tariff based on your location and usage for our Metrics clients. To do this, we conduct a thorough review of your business's historical electricity usage patterns, including examining demand and volume during various periods priced differently according to the tariff.

With network charges typically constituting more than half of the average energy bill, it's essential to realise this annual opportunity to review tariffs and choose the most cost-effective one for your business. Energy Action independently assesses the current network tariff and calculate the savings associated with moving to a more favourable tariff. We recently identified more than $1M per year of savings for a larger client of ours.

Are the charges on your energy bill correct?

Energy Action includes Bill Validations as part of our Energy Metrics service to ensure that our clients' bills are correct and your business is only being charged for the energy used. Since 2015, we've identified more than $3.9 million in savings for our clients through Bill Validations.

We do this by reverse engineering all the components of your bill and compare them to consumption. If we find your bill is incorrect, we work with your electricity retailer to rectify any charges and notify you so you can recoup them.

If your business is looking for immediate cost savings, talk to our experts about how we can help you ensure you are on the right tariff. We can also get you in a cycle of regular bill checking to ensure you aren't paying extra charges Contact one of our advisers on 1300 553 551 or by clicking here.

Potential New Rules for Better-Integrating Energy Storage in the NEM

In mid-July 2021, the Australian Energy Market Commission (AEMC) published a draft rule determination on better integrating energy storage into the National Electricity Market (NEM). The rule change originated from a 2019 request made by the Australian Energy Market Operator (AEMO). 

The driver behind AEMO’s request for the rule change was the increasing growth of variable renewable energy and the increased need for energy storage.  In addition, it is becoming more critical that the NEM is no longer centred around old definitions of customers and generators. Instead, the structure is around the two-way flow of energy to and from the grid. Energy storage will be a key enabler for the bi-directional flow of energy.

What does the new rule mean for the energy market?

The draft rule has several components.  One key feature is creating a new, flexible and technology-neutral category of energy market participants.  This category is called an 'Integrated Resource Provider', which will cover various participants with bi-directional energy flows that may both offer and consume energy, and ancillary services, including storage, hybrid facilities and aggregators of small generation and storage units.

In this context, hybrid facilities include parties that pair different resources together at the connection point to the grid, for example, load and generation, load and batteries, batteries and generation.  As more and more large customers consider behind the meter storage or generation, they could consider becoming an integrated resource provider.

On the face of it, the draft rule appears to be a small change. However, it is one of the most recent significant changes in the NEM that can have longer-term benefits and implications.

The most immediate benefit of the draft rule is removing barriers to storage and hybrid systems participating in the market and creating a more level playing field for all participants. Currently, these participants have to register twice, once as a load and once as a customer. This adds unnecessary cost and complexity.

In the longer term, these changes align with the Energy Security Board's vision of a two-sided market and are the first steps along this path in which technical obligations are placed on services, not participant categories.

What could this mean for energy customers?

As the market transitions towards two-sided, this rule change can provide customers with new opportunities and benefits.  One such example is the enablement of implementing a 'trader service' model, which the ESB identified, where:

What are the next steps?

Recognising the significance of the rule change, its complexity, and the high degree of interest, the AEMC is running an extended consultation period until mid-September.  A decision is expected in late October 2021, with implementation approximately 18 months later in early to mid-2023.  The subsequent reforms on two-sided markets and trader services models will progress separately over a likely longer but yet defined timeframe.

If you have any questions or need advice on the opportunities for energy storage or behind the meter generation for your business, please get in touch with your Energy Action account manager or click here.

Australia's Journey Towards Net Zero Emissions:

Piloting a New Renewable Gas Certification Scheme

The transition of the Australian and global economies towards net zero emissions is underway. This is driven by Government policy initiatives coupled with private sector and investor responses and changing consumer expectations.

Natural gas is an important fuel for heat production, particularly in applications where high temperatures are required. Approximately 25 per cent of Australia's stationary energy consumption is natural gas. In addition, there are even more significant levels of liquified natural gas exports.

While the emissions intensity of combusting natural gas is about half that of burning coal, emissions associated with natural gas extraction for onshore combustion and export accounted for 30% of Australian emissions in 2020.

 Therefore, it is unsurprising that Australia's transition to a net zero economy will require a significant focus on addressing natural gas emissions.

Several approaches to addressing these emissions are currently attracting a lot of attention for their potential to provide an alternative to natural gas at scale

One such approach is using renewable gas, such as biogas, instead of methane or natural gas.  Biogas is derived from the breakdown of organic material such as wastewater, agricultural waste, food waste and industrial waste. From there, it is converted to biomethane and used as a carbon-neutral substitute for methane.  

Research by the International Energy Agency found the world's biogas and biomethane resources could meet 20 per cent of global gas demand while also reducing greenhouse gas emissions.

The use of biogas also has added benefits by addressing waste-related issues and developing a more circular economy.

The pilot scheme

The New South Wales Government managed GreenPower and Jemena and Energy Network Australia (ENA) piloting a renewable gas certification scheme.

The pilot will commence in 2022 and enable a small number of New South Wales gas household customers to have access to verified and accredited renewable gas. 

A successful pilot should assist in enabling further investment in new sources of renewable or green gas.  It will also allow consumers to achieve emissions reductions where they can not readily switch to renewable electricity.

The scheme is expected to operate similarly to the existing GreenPower accredited electricity scheme where customers can voluntarily purchase part or all of their electricity consumption from renewable sources. 

The certification of renewable gas would similarly be voluntary and administered by GreenPower.

The first renewable gas production source to be used in the pilot scheme is the Sydney Water owned Malabar biomethane injection project. This uses wastewater to produce biomethane to be injected into the local gas distribution network. The facility is expected to supply up to 6,300 households with carbon-neutral gas.

The pilot is expected to run for two years and will inform a process to develop a permanent scheme.

Conclusion

The need to decarbonise Australia's natural gas sector is clear, there are, however, several approaches to achieve this outcome, and a combination of approaches will likely be required.

A successful renewable gas certification scheme will help support a sustainable renewable gas industry and reduce emissions.

If you have any questions or need advice on your journey to net zero or the availability and opportunities of renewable gas for your business, don't hesitate to get in touch with your Energy Action account manager or contact us on 1300 964 589.

ACT Renewable Energy Contract for Difference Costs Drive Substantial Network Tariff Increase

On 1 July 2021, the network tariffs for EvoEnergy will increase on average by approximately 43 per cent.  EvoEnergy is the electricity distribution business in the Australian Capital Territory (ACT).  The one year increase is unparalleled and equivalent to $1,476 (42 per cent) for a small business customer and $241 (36 per cent) for a residential customer

The primary driver for the overall increase is a 133 per cent increase in one of EvoEnergy’s costs related to the administration of the ACT Government’s large scale feed-in tariff scheme.  The scheme is part of the ACT Government’s 100% renewable energy target.  

Under the feed-in tariff scheme, the ACT government ran five reverse auction processes between 2012 and 2020 and awarded 840MW of contracts to the successful generators.  These contracts for difference with large-scale wind and solar generators pay the generator for the difference between an agreed fixed price and the prevailing wholesale price of electricity.  The payment can be viewed as a ‘top-up’ payment to provide the renewable generators with a predictable level of revenue.  

These contracts were entered into at times when wholesale prices were much higher. Given the recent significant reduction in wholesale electricity prices, the payments under these contracts have substantially increased.  EvoEnergy’s payments under these contracts have tripled in one year from $42 million to $127 million.

Under the ACT Government’s renewable energy target legislation, EvoEnergy is required to recover these jurisdictional charges from the ACT community. This is achieved by passing the costs through in their network tariffs.

Should wholesale prices increase, the payments under these contracts will decrease, resulting in a reduction in network tariffs.

The ACT Government is not the only jurisdiction to use contracts for difference to drive renewable energy development.  These contracts are also used in other jurisdictions. 

For example, the New South Wales Government’s Electricity Infrastructure Roadmap released in November 2020 contains an Infrastructure Safeguard scheme that uses contracts for difference, and the net cost of the safeguard will be recovered from distribution businesses in their network tariffs.  This mechanism has yet to be fully designed and is only likely to be operational in the next 12 – 24 months.

Victoria also used a form of contract for difference as part of the first round of reverse auctions in its Renewable Energy Target in 2017/18.  Government agencies and departments administer this scheme, and any costs or revenues from these contracts are ultimately covered through the Victorian Government’s budget rather than via network charges.

If you have any questions or need advice on the impact of the network tariff increase on your business, please contact your Energy Action account manager directly or contact us on 1300 964 589.

Federal Budget - A focus on emissions reduction, electricity and gas

In May 2021, the Federal Government handed down its 2021-22 budget with $1.8 billion worth of new initiatives, support, and investment in key areas of emissions reduction, electricity and gas. The Government’s perspective is that the budget measures will “provide reliable, secure and affordable energy to all Australians, and increase investment in technology solutions to reduce emissions in a way that supports jobs and economic growth.”

Key investment areas

The budget announcement included several key initiatives that will impact energy market development, help develop new technologies, or assist businesses and large energy users reduce emissions and better manage energy costs.

Emissions reduction

Investment in emissions reductions initiatives represents $1.2 billion in aggregate.  These are designed to stimulate the development of new technologies as well as reduce energy costs for businesses. Examples include:

Electricity

There is approximately $215 million investment in electricity-related initiatives designed to maintain security, reliability and competitive pricing. Examples include:

Gas

Approximately $58 million in new gas-related initiatives were also announced to continue the Government’s push towards a gas led recovery. Examples include:

Conclusion

There have been mixed reactions from sectors of the energy industry, the opposition and other stakeholders to certain investments outlined in the budget.

However, it is clear that the Government is continuing its focus on technology-related investments to reduce emissions while maintaining reliability, energy security and competitive prices. 

If you have any questions or need advice on the impacts and opportunities of the budget on your business, please contact your Energy Action account manager on 1300 964 589 or by clicking here.

You can find out more about the Australian Federal Budget for 2021-22 by clicking here.

Federal Government powers ahead with gas-led recovery

The Australian Government has commissioned a $600 million gas-fired power station in the New South Wales Hunter Valley to fill a 1000 MW gap in generation capacity when the Liddell coal-fired power station closes in two years.

Announcing the go-ahead in May, Prime Minister Scott Morrison said electricity prices could rise by as much as 30% in NSW if the 660 MW open cycle gas turbine didn’t go ahead.

In what is a significant intervention by the Federal Government into the energy market – ordinarily managed by the states – this initiative marks a new development in the provision of energy in Australia.

The government insists that gas is a transition fuel that will support the renewable energy in the system and that without the uplift in capacity this new plant will provide, electricity prices would rise, and the state’s grid would be lacking.

Power shortfall debated

Many in the private sector were not in agreement with the Government, however, arguing that the gap created by the closure of Liddell would be around 200 MW rather than 1000 MW. The Australian Energy Market Operator also leaned into that view, saying that only between 153 MW and 215 MW would be needed.

Others disagree and say the government stepped in where the free market failed to do so and that the new plant will work alongside the 316 MW gas power station EnergyAustralia is building along Lake Illawarra, south of Wollongong.

The Tallawarra B power station will be the country’s first net-zero hybrid plant capable of running on both hydrogen and natural gas and will sit alongside the existing Tallawarra A 435 MW gas plant.

Illawarra hydrogen hub

EnergyAustralia received $83 million from the government towards the power plant expected to be operational by 2023-24 before Liddell closes. Tallawarra is being seen as an essential step towards establishing a hydrogen hub in the Illawarra.

The Tallawarra B plant is the result of an agreement between the private sector and the state and federal governments. Energy Australia plans to offset the plant's carbon emissions over its lifetime through a combination of renewable technologies like green hydrogen and carbon credits. 

Tallawarra will be the first dispatchable power station built in NSW in more than 10 years and will set a new benchmark for gas generators, consistent with the state’s emissions plan to be net zero by 2050.

Impact on pricing

Energy Action believes that the ‘quick start’ nature of the proposed gas-fired power station in the Hunter Valley is likely to assist in ‘’firming’’ the intermittency associated with renewable projects. Should the project go ahead and attract new renewables projects to the Hunter Valley region, it is likely to place downward pressure on electricity prices beyond 2024

Regardless of whether it attracts more renewable projects, the plant is expected to limit price-spikes from supply disruptions and provide greater supply reliability.

At this stage, the announcement of the proposal has had practically no impact on 2024 electricity contract prices. Energy Action remains of the view that customers should be seeking to secure fixed-price supply agreements out to 2024/2025.

For more information about the potential future impact on pricing or any enquiries related to your contract, please contact your account manager on 1300 964 989 or click here.