Three PMs down, where to next for Australian energy policy?
Every time this country attempts to establish a national energy policy, we lose our Prime Minister. It cost Kevin Rudd his job twice, Julia Gillard once and most recently Malcolm Turnbull, in a dramatic week that made The Bachelor look positively civil.
While the carnage of federal politics is great sport, it’s both distressing and depressing for those energy industry participants that have chosen to work or invest in the sector. Not to mention voters concerned by climate change or energy price reliability.
It now looks like the latest energy policy incarnation in this saga – the National Energy Guarantee – is “dead, buried and cremated”, to use an expression coined by Tony Abbott.
There are big dollars involved. Major energy projects run into the billions and investors demand at least some kind of stability and return on their investment. Over the past 10 years, it’s been easier to predict Lotto results than what next year’s energy policy might be.
Energy policy is fundamental to the way our economy works and to the future health of our planet. These two goals are inexorably linked. ’While we need a stable supply of energy into the future, there’s not much point if the planet is unliveable.
The way energy is delivered to us is changing rapidly. It is getting cleaner, more decentralised and able to be stored in both small and large battery systems to enable energy use to be managed by the minute.
The installed capacity of roof top solar in the Perth metropolitan area is now approaching 1000MW, dwarfing the State’s next largest power station. Rather than welcoming this new, cheaper, cleaner and user-friendly technology, some of our learned politicians seem intent on trying to stop it.
The Federal Government’s proposed National Energy Guarantee would, at the very least, have set a framework going forward. It borrowed the concept of WA’s well-designed electricity capacity market to address reliability concerns and it sought to lower emissions from the sector by locking in the reduction target agreed by Australia under the Paris Agreement.
No-one could quite figure out how it would lower prices to the average home, which have risen by about 20 per cent in the past two years.
That problem, which is particularly felt on the East Coast, has three main causes: lack of competition in the retail space (evidenced by the recent ACCC report); delayed investment in new dispatchable power generation (due to a lack of any real policy framework) and rising wholesale gas prices (due to a lack of domestic supply).
Gas is used to generate dispatchable power, especially in peak load periods, so rising gas prices flow directly to power prices. But why has its price skyrocketed?
There is no shortage of gas in the Eastern States, however, most of the commercially available gas has been bought by large companies to feed new LNG plants in Queensland, supplying markets in Asia. As a result, there’s no gas left for domestic use.
WA has a domestic gas reservation policy, which is working a treat and we now see huge savings on residential gas prices. The East Coast would do well to take note of this policy if they’re keen to reduce their retail power prices.
WA’s electricity and gas market policy settings have worked remarkably well over the last decade, providing stability and leading to investments in the sector that have built new supply capacity; whereas on the East Coast domestic infrastructure investment has stalled.
The main reason why our system works well is because it has bi-partisan and industry support. From the late 1990s we have built up a policy framework that has been accepted by incoming governments from both sides of politics.
“While the carnage of federal politics is great sport, it’s both distressing and depressing for those energy industry participants that have chosen to work or invest in the sector.”
The same can’t be said at the national level, but maybe we can hope that common sense and evidence-based policy will ultimately prevail.
We still have a great blueprint for national energy policy – The Finkel Report, produced by Australia’s Chief Scientist with wide-ranging input from the community and industry. Many of its recommendations were adopted in the National Energy Guarantee, except for one crucial component, a Clean Energy Target. In my opinion, this measure is a logical way to reduce emissions at lowest cost.
It may fall to an incoming Labor Government to go back to that blueprint and put in place a national energy policy that will have broad industry and community support.
Meanwhile, in WA, we are glad the vast Nullarbor Plain makes connecting our energy systems to the East Coast unlikely. Even still, we are part of the nation and investors in our State’s energy sector need certainty on future policy direction.
It is time for the policy merry-go-round to end.
This opinion piece originally appeared in The West Australian.
Richard Harris is the chairperson of the Independent Power Association, spokesperson for DomGas Alliance and Special Counsel at Cannings Purple, specialising in energy and resources and government relations. Contact Richard.
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