A shocking lack of foresight from Australia's power companies

Power companies spent billions in an effort to centralise power generation, and will now need to spend more as the system moves towards decentralisation.

One of the biggest opportunities in Australia for 2015 is the task of making the country more energy efficient. 

The urgency of that task has been reduced by the fall in oil prices but given that many Australian enterprises are unlikely to achieve substantial revenue growth, energy efficiency is an important way to cut costs.

The issue will be highlighted by the proposal of a Dutch auction as part of the Direct Action program being introduced by Environment Minister Greg Hunt.

Direct Action has been panned by the extreme Greens. Many Greens fear that it might help the Australian economy, which is not on their agenda. 

Australian enterprises have not worked nearly hard enough at reducing their energy consumption. The carbon tax simply did not produce the required outcome.  

For example, most of our city buildings could reduce their energy consumption by 30 or 40 per cent and, depending on energy prices, they could recoup their capital outlays in three to five years. But few do it it. 

Similar technologies are available for a wide range of industries. I learned of this last year from Dr Roland Busch of Siemens, who was visiting Australia (The looming age of low-cost global energy, November 20).

My interview with Dr Busch on this subject is above. The Direct Action program will cause a large number of enterprises to put forward energy savings investments and they will bid a carbon reduction price, aiming to gain government help.  

My guess is that a large number of the energy reduction programs will simply not get there in terms of subsidies because the trigger carbon price for help will be pushed too low. 

But what the Direct Action program will do is force companies to look at this area. Many will realise they should undertake the task anyway. 

In addition over the next decade we are going to see the recent major changes in energy generation accelerate. Energy generation is going to be much more decentralised as companies and households discover they can generate part of their energy requirements themselves.  

Part of that decentralised process will involve energy storage and technology is moving rapidly to solve some of those problems. 

Power users will save money in the process. At the same time, that will make it far less necessary for Australia to erect large power plants. Indeed, the day of the large power plant is ending, although some of the large coal power plants may be replaced by nuclear or alternative energy.

The problem with Australia is that our large power grid companies/state authorities did not see the likelihood of the decentralisation of power generation in the near future. And so they spent billions in a grid network to enshrine the existing centralised power generation system.  

As I understand it, large sums are now required to change that grid to modern decentralised requirements. The NSW government, which is selling its power grid, is making a very sensible decision because the buyer is going to need to update it.  

There will be enormous community anger that, having been slugged with levies to pay for the recent upgrades, they will now be asked to pay again. But this time, those payments will be linked to the past mistakes of the power authorities.