Submission to Draft 2023-24 GenCost
The Centre for Independent Studies (CIS) appreciates the opportunity to provide a submission to the Australian Energy Market Operator.
The CIS is a leading independent public policy think tank in Australia. It has been a strong advocate for free markets and limited government for more than 40 years. The CIS is independent and non-partisan in both its funding and research, does no commissioned research nor takes any government money to support its public policy work.
Our submission finds significant issues with the current Draft of GenCost, to the extent that the main conclusions drawn from the report — that integrated renewables are cheaper than all other sources today, and in the future — is incorrect and misleading. There are significant methodological inconsistencies in the way fossil fuel power is treated in the 2023 figures, leading to substantially higher LCOE estimates for these power sources. We also cannot reconcile the integration costs in the 2023 figures for renewables with the ISP scenario that is quoted as a reference. We believe that storage costs on their own might be underestimated by a factor of two.
Given the significance of this report to the public policy regarding the energy transition, we recommend CSIRO should conduct the analysis more thoroughly, so it can be demonstrated to be objective and rigorous. We also believe it is essential that CSIRO draw conclusions that fall outside the scope of AEMO’s Integrated System Plan with confidence and credible independence from the opinions of AEMO as an organisation.
In the GenCost consultation webinar, Paul Graham stated that the CSIRO does not want to create a “competing set of modelling that sits next to the ISP” but would rather “use the ISP as the benchmark and not our work as their benchmark”. We believe this is the wrong approach. It would be better if GenCost were an independent analysis that did not rely on the ISP being free of mistakes or omissions, and was capable of revealing them where present. But even if GenCost must rely on the ISP, as it currently stands, it should be consistent with it, and capable of independently drawing conclusions that the ISP’s method is incapable of drawing.
The ‘overall’ cost of energy from a particular energy system, based on a dominant energy technology, is most certainly a conclusion that the ISP’s method is unfit to assess, and one which CSIRO’s GenCost should address — and claims to. The ISP’s model omits to factor in several costs, such as: Snowy Hydro 2.0; committed and anticipated transmission projects that have not undergone the RIT-T process; subsidies for coal plants to remain open; and consumer energy resources (including the necessary behavioural changes with respect to EV charging as well as distribution network upgrades). It also does not contemplate any policy scenario that does not include high targets for renewable energy, and a tight binding carbon target out to 2050. All optimisation in the ISP occurs within these constraints; making it impossible to compare the actual costs of alternative generation choices.
Given those limitations on the ISP, it’s of profound public importance that GenCost’s conclusions on these matters are credible and rigorous. Please find below our submission and recommendations to that end.
Yours sincerely,
Aidan Morrison
Director
Centre for Independent Studies Energy Program