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SA Rolling Blackouts - Ai Group comment

"There will be more to find out about what exactly happened with the rolling blackouts in South Australia yesterday, but the situation will no doubt further sap business confidence and investment," Australian Industry Group Chief Executive, Innes Willox, said today.

"These outages are disruptive and costly for business and dangerous for households. At the same time, energy users are also being hit with steep increases in the price of electricity and gas across SA and the other eastern states.

"Playing a blame game would not be productive. Neither would writing a blank cheque for more infrastructure to guarantee 100% supply.  We’ve seen how expensive that can get.

"We need both long-term reform for a market that delivers affordable, reliable and clean energy, and urgent shorter term measures to ease the current crunch. We expect the COAG Energy Council will fast track several projects in coming months to improve security and help us learn about what works while rule changes are considered. Increased attention to energy efficiency is a critical way to reduce demand and cost pressures.

"Clearly our electricity grid needs to perform better and become more flexible. One way of doing that is 'demand response', where lots of energy users of all sizes have an incentive to cut back usage a bit at critical times so that nobody needs to be blacked out altogether.

"Currently only the largest energy users can meaningfully participate in demand response, and even for them it is often not very attractive.

"Energy insecurity is also driving businesses to install diesel generators and households to consider batteries. The former are not a good environmental outcome, and both kinds of investment will in practice usually sit idle and do nothing to help individual energy users or the grid as a whole.

"However, both distributed generators and batteries could do a lot to stabilise the system and help everyone – if owners and investors had an incentive to operate them that way. This is a big issue that the current Finkel Review of the National Electricity Market is grappling with.

"The outcomes of that Review will need a serious response and sustained cooperative action from all the States and the Commonwealth. The current blackouts underline the cost of failure – and industry will not forget them," Mr Willox said.

Media Enquiries: Tony Melville – 0419 190 347