Storage under scrutiny

The opening paragraph sets the big picture: “Australia is undergoing an energy transformation that promises to intensify over the coming decades. In the electricity generation sector this transformation involves: a greater reliance on renewable energy in response to climate mitigation policies; relocation of where energy is generated and distributed as a result of changing economics of energy costs and technological developments; and how and when energy is consumed with the advent of prosumers.”

Thus begins the report on The role of energy storage in Australia’s future energy supply mix, published today by the Australian Council of Learned Academies working in tandem with Chief Scientist Alan Finkel, a commentary bringing energy back in to the media headlines.

The sum of the report’s message is quite neatly conveyed in the opening sentences of the media statement heralding its publication: “The report shows that Australia has a wealth of natural advantages (in developing large and home-scale energy storage systems) that could aid the development of new industries, exports and create jobs in mining and manufacturing. It also warns that, without proper planning and investment in energy storage, electricity costs in Australia will continue to rise and electricity supply will become less reliable.”

And this, in part, is how the 158-page report concludes: “There is a near-term requirement to strengthen Australia’s energy security in NEM jurisdictions and maintaining acceptable energy security levels for customers will dominate over energy reliability requirements until well in excess of 50 per cent renewable energy penetration.”

It also observes elsewhere: “Australians are deeply concerned by the sharp rise in electricity prices and affordability and hold governments and energy providers responsible for the perceived lack of affordability. Energy storage is not a well-known concept in the community and concerns exist at the lack of suitable standards at the household level. Australians favour a higher renewables mix by 2030 – particularly PV and wind, with significant energy storage deployed to manage grid security.”

The never-ending political problem is Australians want to feel good about the environment but don’t want to pay the butcher’s bill for going green.

The ACOLA panel says that further work is needed to establish “the optimum balance of generation, storage and interconnection, taking into account both cost optimisation and the long-term strategic opportunities for Australia.” It recommends “a deeper analysis of opportunities for growth of a substantial energy storage industry in Australia.”

Among the threats to a brave new world of storage seen by the panel are policy and regulatory risk (caused by “unsupportive energy policy or inadequate safety or environmental standards”) and market development risk (“distortions promoting an inefficient storage mix”) as well as “land use issues and resource availability limiting certain technologies.”

The panel says public opinion research it has had undertaken demonstrates that “there is low (community) trust in the Australian energy system’s capacity to deliver consistent and efficient electricity provision at reasonable prices” and “deregulation of the electricity market, changes in feed-in-tariff schemes and other time of use tariffs have led to an underlying general mistrust of the government and energy providers.”

It adds: “The majority of those surveyed suggested they would look to government to play a role in the future energy mix, but lacked confidence that their preference for higher renewables would be achieved without consistent energy policies.”

The panel reinforces public scepticism by warning that “without effective planning, appropriate investment and also incentives to develop and deploy energy storage technologies, the costs of electricity in Australia will continue to increase and there will be less reliable (adequate and secure) electricity supply,” threatening “large negative implications on the Australian economy.”

One of the panel’s more telling observations, it seems to me, is: “The availability of private sector risk capital and profitable revenue streams for Australian energy storage start-ups and projects is a challenge for new ventures, as is policy uncertainty. Profitable revenue streams from energy markets together with consistent, stable and integrated energy and climate policies will be essential to drive investment in energy storage and other technology solutions that support decarbonization of the electricity system while ensuring system security and consumer equity. Technology-neutral market-based reforms will be required to address these challenges at least cost.”

Note the last sentence – what could be further from the minds of the green boosters and a great many politicians ever on the hunt for (vote) winners to pick?

Tucked away in the report is the observation that the different types of energy storage “have varying costs and other characteristics,” so determining the “best” form (the panel’s inverted commas) depends on where it is needed, for what purpose, the nature of the electricity grid and current and future types of generation.

There is also this not-minor thought: “Unless planned for and managed appropriately, batteries present a future waste management challenge.” Someone will have to pay for that, too.

The paper is not exactly a slam dunk for energy batteries, then, a point that might be missed by casual readers of the media.

None of the forays in to storage – and there is near universal agreement among the more educated scanners of the power market scene that this technology in a number of forms must have a role in the transition taking place – will come cheaply.

Modeling for the ACOLA panel suggests that storage investment for the current approach to renewable energy would be $3.6 billion (in what the modelers assume will be 2030 money values), $11 billion for the RET Labor is pushing and $22 billion under the target green activists want pursued.

The report is upbeat about opportunities for Australian innovation as well as energy storage intellectual property and for value-adding for beneficiation of our mineral resources such as lithium – it would be very surprising if such a panel did not take this view but this aging sceptic thinks Us Outdoors should be mindful of all the promises of a decade ago about local manufacturing of wind and solar gear and the fact that local energy investors most frequently pick up technology from the best overseas sources while our politicians keep veering off in to the interventionist bushes for their venal reasons as well as hacking at subsidies when the consumer cost heat gets too much to bear.

In the best of all worlds, Australian opportunities are exceptional but we will have to lift our collective game a long way to pursue optimal outcomes.

Finkel, talking to the media at the report’s unveiling in Canberra today, said “We have a long way to go and the best thing to do is to start now.” There’s a lot more to that statement than the glib “Bill Shorten is right” (about a 50 per cent RET) being picked up in media headlines as I write this.

Rather in context, I feel, the Energy Security Board chair, Kerry Schott, was telling a Melbourne conference at roughly the same time that most Australians – “apart from a hard core few” – want to see continuous greenhouse gas reductions but “at the moment all we are doing is throwing grenades at each other which is not very helpful.” Quite.

 

 

 

 

 

 

Scene-setting

To state the bleeding obvious, it is not becoming any easier to have a satisfactory conversation about where energy demand and supply is heading, still more so when cutting carbon emissions is thrown in, whether one is talking about Australia or the world as a whole.

The noises coming from Bonn, where the latest United Nations gabfest on climate change is winding towards an end, illustrates this in any number of ways.

Here, for example, is Angela Merkel, still wrestling as I write this with the challenge of forming a new German government 54 days after the national poll, talking to the CoP23 audience about the Energiewende. “Now, at the end of 2017, we know that we’re still lagging quite a bit,” she said, acknowledging the country’s abatement ambitions are playing a significant role in the talks to form the next governing coalition.

“These talks,” she said, “are about fulfilling the existing pledges, but also about social questions and jobs – for example when talking about reducing [the role of] coal – and about profitability and the affordability of energy.

“Even in a rich country like ours, there are significant conflicts about this in society – and we have to solve them.”

Coal, she said, has to “significantly contribute” to reaching the German emissions target – “but how exactly; that’s what we will have to discuss very precisely in coming days.”

Goodness, and here were we thinking (because the activists constantly tell us so) that all we have to do is follow the German approach and our own “Energiekrise” will be over.

I referred in my previous post on this site to the International Energy Agency’s latest Outlook publication – which, contrary to what can be read in various bits of the media, is not a set of predictions but of scenarios – and overnight I have been looking at an IEA table that seeks to encapsulate our possible global futures out to 2025 and 2040 using millions of tonnes of oil equivalent as a common denominator.

The agency splits its current scenarios in to three: one extrapolates from existing national policies, a second takes up the pledges the world’s governments took to Paris and which form the backdrop for the Bonn discussions and a third is based on what IEA analysts suggest could be the picture if a far more major effort should be made to pursue the goal of limiting climate change.

To continue as we are at present, the IEA suggests will see oil usage at 4,815 mtoe in 2025 and 5,477 mtoe in 2040 – staying ahead of coal (4,165 and 5,045 mtoe) and gas (3,514 and 4,682 mtoe). In this scenario, nuclear’s share of demand is 839 mtoe in 2025 and 997 mtoe in 2040. The renewable segments are hydro power, bio-energy (both traditional and modern usage) and non-hydro resources, mostly wind and solar power. The IEA postulates these at 409 and 511 mtoe for hydro, 1,507 and 1,728 mtoe for bio-energy and 441 and 856 mtoe for wind, solar and so forth.

In this context, we can expect (says the agency) around a 23 per cent rise in energy demand between 2025 and 2040 and the dominance of fossil fuels (coal, oil and gas) to continue – amounting to some 79 per cent of the total a quarter century from now.

Of course, we have the word of governments at Paris that business as usual is just not on, so the outcome of pursuit of their announced commitments is important.

Under “new policies,” which the IEA puts forward as its “main scenario,” the agency projects a situation in 2025 where the coal share is 3,642 mtoe, oil is 4,633 and gas 3,436 mtoe. The nuclear share is 839 mtoe and hydro 411 mtoe – with bio-energy at 1,530 mtoe and wind, solar etcetera at 490 mtoe.

Looking out to 2040 in this scenario, the agency suggests the breakdown could look like this: coal 3,929, oil 4,830, gas 4,356 (overtaking coal), nuclear 1,002 and hydro 511 – with bio-energy up to 3,801 mtoe and wind, solar etcetera surging to 1,133 mtoe (nearly triple what it was in 2025). The fossil fuels share of this outlook is 75 per cent.

The critical factor is the global output of carbon dioxide emissions, which the agency sees falling from 42.7 gigatonnes annually in 2040 under business as usual to 35.7 Gt under “new policies.”

This, it points out, will not deliver a desirable outcome in managing climate change, which is why it postulates a “sustainable development” scenario in which coal plunges to 1,777 mtoe in 2040, oil is at 3,306 mtoe and gas at 3,458 mtoe while nuclear’s share rises to 1,393 mtoe, hydro power is at 595 mtoe, bio-energy is 1,551 mtoe and wind, solar etcetera soars to 1,955 mtoe.

In this scenario, global energy demand has fallen to 14,084 mtoe (on the back of a major energy efficiency drive) and global annual carbon dioxide emissions are down to 18.3 gigatonnes.

However, even this is still a world in which fossil fuels deliver 61 per cent of energy needs to a population now pushing towards 10 billion people.

Green activists claim to like this scenario (which they treat as a prediction) because, as one local booster put it this week, it shows coal to be “dead and buried” as a source for electricity – which it doesn’t. But the big issue (in terms of managing greenhouse gas emissions) is the whole global energy scene and, even after what would need to be a Herculean investment effort, coal, oil and gas would be a significant part of meeting the needs of the world’s community if this scenario came to fruition.

It’s worth noting also that this “sustainable” model sees nuclear and hydro power together – both technologies the darker greens strongly oppose – making a contribution bigger than bio-energy and roughly as big as wind, solar etcetera.

Earlier this month I saw a major newspaper here headlining our “torturous” path to the energy future. “Torturous” is characterized by pain and suffering; but, perhaps inadvertently, the paper has it right, I think. Our local debate would be a tad less torturing if more of it could focus on real analysis rather than guff, emotion and wishful thinking. As one of my distinguished (and exasperated) colleagues put it in an email exchange this afternoon “sound energy policy has become perverted by unfiltered tripe,” calling for more sagacity in assessing the situation.

Such times!

There is so much on the menu, both officially and unofficially, at the UN’s gabfest about climate change (“CoP 23”) in Bonn that it is inevitable media coverage amounts mostly to “snatch and grab” as I recently saw one journalist say when she meant “smash and grab.”

Between the activists, who treat the UN meetings as an opportunity for headline-grabbing and ritual defenestration of anyone speaking up for fossil fuels, and the politicians (from Angela Merkel to people whose names you won’t remember beyond your next sleep) hunting domestic kudos for virtue-seeking (eg Canada’s environment minister “declaring war” on coal for a country that has 10 per cent of the fuel in its power mix and nevertheless is struggling to meet the promises it made in Paris in 2015), the flow of information is pretty indigestible.

When it’s all done there hopefully will be a set of rules for carbon mitigation and keeping track of the Paris commitments thanks to hard work in back rooms but the visible process is living down to past standards.

Meanwhile, by way of an essential backdrop (for the few looking beyond Bonn’s funny business), there is the carefully coincident publication of the International Energy Agency’s latest World Energy Outlook.

Just one aspect of this should represent rather grim news for the shoals of government officials and ministers swimming through CoP23’s waters. Oil, says the IEA, will continue to grow as a source of global energy over the next two decades, driven by continuing demand growth in the large communities of what we used to call the “developing world,” quite a lot of its in our own Asian backyard.

The much-hyped take-up of electric cars forecast for the years from now to 2040 will not serve to consign oil to the scrapheap of history, opines the IEA. This inconvenient indicator, along with a predicted 45 per cent increase in demand for natural gas and continuing substantial use of coal, makes a mockery of the “death of fossil fuels” mantra that crops up practically weekly in public debate.

The IEA attributes the ongoing major growth in energy demand (rising 3.4 per cent a year) in the main to “a population that expands from 7.4 billion today to more than 9 billion in 2040 and a process of urbanization that adds a city the size of Shanghai to the world’s urban population every four months.” (That’s 12 Sydneys a year if you do the maths.)

As I have said here on more than a few occasions, I have problems with the language the agency employs as in its public statements in playing to the renewables gallery. In this new report, for example, it includes as a headline in its media briefing “coal strikes out” – and then tells us that, after adding 900,000 megawatts of coal-burning capacity to the global generation mix between 2000 and now, there will “only” be a net addition of 400,000 MW to this part of the world’s power supply between 2017 and 2040. Howzat?

Moving on, our local upstream petroleum producers see the IEA’s new report as an early Christmas present.

In a new media statement, Malcolm Roberts, CEO of the Australian Petroleum Production & Exploration Association, explains why “the IEA forecast of an increase in the share of gas in global energy demand is great news.”

Roberts says: “Our $200 billion investment in LNG projects will supply a growing global market over the next 25 years.  This means Australians will see a steady stream of high paying jobs, export dollars and revenue for governments for decades to come.

“Most of the growing demand for natural gas is expected to come from China, India and other countries in Asia that have significant concerns over air quality. Our proximity and reputation for reliable supply make us well-placed to capitalise on this growing opportunity.”

He adds: “The World Energy Outlook also highlights the environmental credentials of gas as a cleaner-burning power source and a key part of moves to reduce carbon emissions in Australia and around the world.”

And, of course this news is another peg on which APPEA can hang its constant message to our policymakers, federal, State and Territory, and to voters (supposing they ever get this point). “The IEA report,” says Roberts, “also highlights a major challenge for Australia, with the United States expected to become the world’s leading LNG exporter by the mid 2020s. The opportunity (for us) is huge but our competitors are hungry. In an extremely competitive global market, we cannot be complacent.

“If Australia is to capture further investment in LNG production, it is vital we get the policy settings right by maintaining a stable and competitive tax regime and reducing regulatory costs.”

Despite the value of the existing gas industry (serving export and domestic markets) for our economy – via jobs and local industry expenditure – and for government income via taxes and royalties, I fear our community in the eastern States (making up 86 per cent of the population) just now doesn’t give a hoot for the global opportunities; the focus here is on current domestic needs in terms of adequate supply and prices well below today’s levels.

Ongoing gas production developments targeting the overseas market — Chevron’s 8.9 million tonnes a year Wheatstone project is in its commissioning phase while the 3.6 million tonne capacity Prelude floating LNG facility, operated by Shell, and the 8.9 million tonne Ichthys venture by Japan’s Inpex are due to start production next year – just don’t get the popular media attention of yesteryear and may even rub salt in the pain of consumers in the mass market, farming and manufacturing because they underscore that half of our gas production goes abroad (and it will be more by 2020).

The contrast with America is stark: despite expected rapid LNG export capacity growth, the US Energy Information Administration’s Annual Energy Outlook 2017 projects their trade to amount to only about nine per cent of total domestic natural gas production by 2020. And US domestic gas prices are far lower than they are here.

It’s not surprising in this environment that our West Australian friends see opportunity – with an “O” – in the east or that the Turnbull government (struggling critter that it is) sees value in a feasibility study in to a $5 billion pipeline serving the five mainland States on this side of the Nullabor. Even if this goes ahead (and when might it be operational?), the price problem remains, something the Finkel report saw fit to point out, warning that the benefits of supply security need to be weighed against consumer costs.

All of which brings us around to the prospect of some of the West’s LNG being shipped to Melbourne or Newcastle.

Analysts UBS painted a rather dark summary of the situation in an October review. “Key conclusions,” they said, “are: 1, the east coast will remain reliant on diverted Qld LNG supplies for at least the next five years (and most likely longer), as alternate gas supplies of any size are still a few years away; 2, (project) cost and distance of new supply from markets means that (new) development is unlikely to exert material downward pressure on east coast gas prices any time soon; 3, declining Victorian supplies mean that South Australia and New South Wales will become increasingly reliant on alternate sources; 4, the largest sources of potentially lower cost supplies (NSW, Northern Territory shale) face regulatory issues; 5, there is room for LNG imports, but landed price is a key challenge; and 6, the elephant in the room is the Gippsland Basin JV – just how much additional gas is it able to bring to the market and at what price?”

APPEA’s Roberts acknowledges that “west coast gas is likely to be an expensive solution to east coast supply concerns,” urging political acceptance that “the reality is local gas will always be cheaper gas.” It is, he adds, “incredible” that Victoria and NSW, home to the biggest problems, are determined to rely on other States to save them.

Of course it’s incredible but, as you may have noticed, the incredible is becoming normal in our politics across a wider spectrum than the “energy crisis.”

It’s hard to go past Dickens in our present state. Remember? “It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity” etcetera.

Carrying power fears to polls

If you wanted to come up with a core perception about energy among the mass of our population as 2017 winds down, it might be that, to quote a letter writer to a regional newspaper this week, “there shouldn’t be an energy crisis in Australia.”

This comes with the community-wide understanding that 20 years ago we had some of the world’s cheapest electricity prices for consumers large and small and now we don’t.

Analysis of public opinion published by Roy Morgan Research this weekend shows that the “energy crisis” is now the single biggest domestic issue on the minds of Australians, attracting 14.2 per cent of reactions versus, for example, 7.5 per cent for unemployment.

I suspect all the rhetoric about this from politicians and key players washes right over the broad community; “just fix it” is the mindset of the masses. (And Roy Morgan finds “lack of vision” by politicians is the biggest worry for 5.5 per cent of respondents.)

Regrettably, the cliché of choice for those charged with dealing with energy matters is correct: there is no silver bullet – still less so when the actual challenge is to make energy not only more affordable but also reliable and there is a further political necessity to apply greenwash. As I saw a lawyer write in the past week, “The energy mix is a policy decision but, regardless, what everyone needs is reliability at a reasonable price.”

Right now the federal theatre is consumed by the drama of the right of a raft of MPs to sit in Parliament House, Canberra, an issue that has morphed in to debate about Malcolm Turnbull’s capacity to stay Prime Minister and could, it seems, take us to a point where the Coalition loses government next year. This leaves the “energy crisis” caravan suddenly parked at the pavement, a situation that could change again if summer brings a threat to power supplies in the eastern States.

In the meantime the citizens of Queensland are at the polls, two months before they expected to be (because the timing suited Premier Annastacia Palaszczuk), the first major election to be held since “energy” and “crisis” became joined in politics and the media.

The State election outcome is anyone’s guess, in part because of the possible impact of One Nation and other minor parties. What is obvious some two weeks before Queenslanders vote is that quite a large number of them, significantly those in the State’s central and northern regions, especially farmers and small business people, are fed up with (and, in some cases, frightened by) their power bills.

The attitude is summed up by the head of the peak sugarcane growers’ association, who declared this week that “farmers are desperate to find a solution to the rising costs and unsustainable electricity prices.”

Dan Galligan says: “This is becoming a real crisis moment for people in business in Queensland, not just irrigators, but anyone who relies on electricity which is almost every business. For us, as an exporting industry trying to compete with overseas countries that are often under subsidized pricing regimes for the products they grow, we really have to manage costs.”

Queensland Farmers’ Federation president Stuart Armitage, while noting that it is “encouraging” that the contending State political parties are all releasing energy policies and making positive commitments, says what is needed is a “holistic solution” and that the next government must be willing to look beyond one or two areas and commit to a longer-term agenda for an electricity “fix.”

As well, the Chamber of Commerce & Industry Queensland is expressing concern that this month could see a demand peak similar to last February’s heatwave requirement when the State capacity reserve got uncomfortably tight. The Palaszczuk government is promising that it will have the mothballed Swanbank E power station (gas-fuelled) back online by New Year’s Day but CCIQ is fretting that the weather could bite supply before then.

The business association asserts also that 170,000 State jobs are at stake if the energy price problems are not addressed.

The Liberal National Party is promising to restructure the government-owned supply sector yet again, to write down the network asset base by $2 billion and to back construction of a new, 750 megawatt coal-burning power plant in North Queensland – while Labor opposes the FNQ plant and spruiks its plan to have 50 per cent of Queensland electricity supply from renewables by 2030. It is also offering to give households and small business a $300 million discount on power bills while the LNP offers a rebate to farmers.

Former federal Energy Minister Ian Macfarlane, now heading the Queensland Resources Council, argues that building the coal plant will (eventually) “bring down prices for everyone” because of its impact on wholesale costs.

Entirely predictably, Labor has tossed the power privatization card on the table despite the LNP swearing blind it won’t contemplate the move again after doing so helped sweep it from office in January 2015.

(In passing, in the process of pushing State Labor to rule out gas exploration and production bans in the Cooper Basin, the Australian Petroleum Production & Exploration Association has provided some interesting numbers on the contribution of the upstream petroleum industry to Queensland. APPEA says this amounts to 60,582 jobs in 2016, generating $12.8 billion in State economic activity and, in 2017-18, contributing an estimated $885 million in State royalties.)

Come what may in Queensland on 25 November and what may in federal politics between now and about Easter, the energy policy choice (to quote the Grattan Institute) remains between a rare outbreak of bipartisanship or a depressing continuation of current trends delivering the worst outcomes for, in particular, eastern Australia.

For the mass markets and consumers like manufacturers and farmers, the prime focus remains on what they are paying – with new UBS analysis forecasting wholesale power prices will remain relatively high out to 2020 on the back of $8 to $10 per gigajoule gas prices.

Why they have the irrits

I was unwell at the start of this week and unable to attend the Quest Events NEM Future Forum conference in Sydney or to chair the second day that featured Mark Butler, federal Labor’s spokesman on climate change and energy.

At first impression, he couldn’t have said anything of importance because the mainstream media ignored the talk, but I have now had the chance to read it – Butler has made it available via Twitter – and there are a number of points that deserve wider attention.

Not least, it is an explanation of why there has been a negative reaction from Labor to the federal government’s “national energy guarantee” proposal and why the States are unhappy.

Given that this step really requires endorsement by the Council of Australian Governments’ Energy Council, which is at present scheduled to meet on 24 November, there is value in understanding Labor’s initial response – and in obtaining it outside the prism of the House of Representatives question time, which, whether watched live or seen through Press Gallery coverage, is more a schoolyard biff session than a sober debate between our country’s leaders.

The federal government line is that their opponents have been caught “flatfooted” (says Josh Frydenberg) by the new approach and that the States will see its value (says Malcolm Turnbull) despite what Labor premiers have been saying to the media.

Butler told the NEM Future Forum that there are more questions than answers available from what the Turnbull government has provided, including the eight-page Energy Security Board response to Frydenberg’s request for an alternative to the Finkel task force’s “clean energy target” proposal.

The NEG, Butler argues, is “an incredibly rushed job.”

He compares it with the “emissions intensity scheme” approach that was outlined by the Australian Energy Market Commission in 2015, subjected to “a whole lot of different pieces of work” over some 18 months ahead of the scheduled CoAG leaders meeting in December 2016 (lost when Turnbull called a federal election) and taken to that poll by Labor.

“We had consensus by and large (on the EIS) across the system by last December,” says Butler, “but (the measure) was junked as a result of internal turmoil in the Coalition party room.”

Subsequently, he points out, the CET that emerged from the Finkel task force process had a similar level of across-the-board support and was junked again because of Coalition internal turmoil.

Now, he argues, the NEG “has not been subject to anything like the EIS and CET processes.” And, he adds, “it is quite clear” from evidence given the recent Senate estimates hearings that “the Department of Environment & Energy has done no analysis of the reliability or emissions reduction components of the NEG before it was released as new policy – and it is quite clear that there was no consultation with other departments.”

Nor, he declares, was there consultation with industry – but, most importantly, there was none with the States and Territories.

The Energy Security Board, he notes, is not a creature of the Prime Minister or his government. It was appointed by CoAG, with its chair and deputy chair nominated by State governments.

“The States,” Butler told the NEM Future Forum, “woke up to newspaper headlines, and then a press conference by the Prime Minister and the board, announcing what the States would be expected to implement – because the NEG would be implemented in South Australian legislation, and reflected throughout the other NEM jurisdictions.This process has given the States and Territories the irrits, I think it’s fair to say.”

The real dispute, Butler argues, “that confronts us now is not so much about whether an EIS or a CET, or even a more developed NEG, is the right mechanism to meet the challenge of stability and certainty – it is more fundamentally about where we want to take this system (the NEM). That has not been resolved by the announcement of the NEG. If anything, what little we know about the NEG – or the assumptions that underpin the NEG – deepens the dispute about where we want to take the system.”

The market, in his view, faces two challenges: generation renewal and carbon abatement. Over the next 15 years “we are going to lose a whole lot of our generating infrastructure and we need to build new kit.”

Butler’s perspective is that the big issue is whether Australia embraces a future that “is renewables.” (That sound offstage is the nuclear lobby grinding its teeth.)

And, he adds, the Queensland election “will be significantly fought on whether the State government should drive the building of a new coal-fired power station in FNQ or whether to continue with the (Palaszczuk) government’s 50 per cent renewable energy target.”

His political argument is that “strangling renewables” is crucial to the Turnbull government’s NEG approach “and if you are looking for certainty and stability, you are not going to get it from a mechanism whose political underpinning is an ambition to strangle (this) investment.”

He asserts that the NEG, as set out, would see only about 250 megawatts of renewable capacity added annually to the power supply system from 2020 to 2030, including rooftop PVs (currently running at 750 MW a year).

As well, Butler takes up the issue that electricity suppliers should be required to do a heavier share of abatement than generation’s current proportion of national emissions. Its ability to do so, he claims, is “clearly demonstrated” and not requiring this has “extra-ordinary implications” for other sectors of the economy such as agriculture and heavy industry.

Butler’s paper needs to be read in full to get the Labor take on the NEG and the broader NEM implications, but, in keeping with a point I have pushed several times in these posts lately, his comments on the political environment also need attention. (Butler’s other hat is as national president of the Labor party.)

“We are now into State election season,” he told NEM Future Forum. “We have three NEM regions that have State elections over the next five months. That means that there is not any real likelihood of COAG progress here.”

I find it remarkable that this speech has been almost literally ignored by the mainstream media and its political commentariat, given the huge amount of coverage of the “energy crisis” this year. As a dissection of the state of play from the alternative national government, it requires some attention, I’d suggest.

And one thing more: it is also remarkable to me that Butler could deliver this speech without once – not once – addressing the issue of electricity prices and the future affordability of supply. He even went round it in identifying the energy question in the Queensland election stoush – yet the coverage coming out of the State this weekend reinforces the view that power bills (for households, farmers and factory managers) is a major issue.

In this context, let me refer you to a commentary from Energy Networks Australia, published this weekend, that canvasses “how electricity became a headline CPI act.”

The ENA’s acting CEO, Andrew Dillon, rounds it off by writing: “As review after review into the energy sector has found, there’s no silver bullet to fixing rising power prices. However, these reviews also consistently point to a common opportunity – the implementation of nationally consistent energy and climate policy that lasts beyond a single election cycle.”

PC idea worth some thought

An interesting proposition from the Productivity Commission that goes to the heart of the east coast “energy crisis” is, rather surprisingly I think, getting no attention at all.

Last week the commission released its five-yearly review of the nation’s productivity (“Shifting the Dial,” available on its website, something all thinking Australians should read) and a number of the topics on which it has made critical comments, including energy, have received a lot of media attention (and rightly so).

A particular commission perspective on better managing the gas problem has met with less interest.

This is part of what the review says about the issue: “Removing the moratoria on gas exploration and development in New South Wales, Victoria, Tasmania and the Northern Territory, which have slowed the growth in supply, are one place to start (to ensure adequate domestic supply).

“There are more effective models of community engagement which exploration firms can, and should, seek to apply if given the opportunity.

“Local employment and investment should be upfront considerations, not left to others to guess at. Royalty regimes may need review.

“Bans are unlikely to be lifted simply because of pricing concerns. The decision (by the federal government – which the commission labels ‘undesirable’) to intervene in exports may actually relieve a pressure on States with bans.

“A voluntary industry-wide code of practice might help the gas industry improve their relationship with the community, but must be accompanied by moves of substance.

“None of this is intended to question the science and the efforts of chief scientists to establish safer practice. But, as is often the case, the science is not enough to carry the policy debate.

“To build community confidence in gas exploration and production a code must go beyond other desirable aspects of gas exploration — safety regulation, sound scientific evidence, and monitoring and enforcement of compliance — and include clear guidelines and arrangements to manage community impacts and support landholders in negotiating land access agreements.”

So far as I can see, this advice has been allowed through to the keeper since the report appeared.

There has been no reaction from the federal Environment & Energy Minister, Josh Frydenberg. In fact, the Sydney Morning Herald reports that his office “declined to comment on the report” – but this, I don’t doubt, was wholly about the PC embracing the carbon pricing at exactly the time the Turnbull government announced a policy (the “national energy guarantee”) in effect eschewing it, something the media pack have seized on eagerly (and who can blame them?)

There’s no reaction to the PC proposition on a code from the moratorium ringleader, the Victorian government.

No comment from the New South Wales government, which has been meandering for many months on a path to who knows where when it comes to addressing the State’s pressing gas needs issue. (The Australian Petroleum Production & Exploration Association CEO, Malcolm Roberts, slammed it earlier this month: “The NSW government has a Yes-No approach.  It claims to be open to business, but boasts of closing nearly all the State to exploration. And it seems to be in no hurry to release new acreage or to approve the only live project in the State.”)

But even the upstream petroleum industry has not reacted so far to the commission’s suggestion about a positive new approach to gasfield access. And neither have any farmers’ organizations.

Perhaps few have read to page 161 of a 255-page report, perhaps there is so much else in the document to attract attention – but I think this commission view deserves some reflection where it matters.

The core reasons why this is so have been canvassed widely many times, not least the fact that the gas imbroglio is a fundamental part of the electricity market mess now labelled a national crisis.

As the commission points out in its new report: “The difficulty for generators in accessing long‑term supply contracts at acceptable prices, coupled with uncertainty in carbon pricing, (has) reduced the viability of investment in gas-fired generation — the natural complement to renewables. The significant increases in the domestic price of gas have been a key factor in the rising wholesale electricity prices.”

Does the PC perspective also not fit with the gas industry view that the States could (I’d say should) take up the Queensland approach to having development facilitated independently?

As the Australian Pipeline & Gas Association president at the time, Shaun Reardon, put it at the organization’s annual conference in Cairns this month: “The Queensland experience – which empowers the State gas commissioner to consider developments on a case-by-case basis while also taking in to account community and other issues – presents an enviable model. State and Territory governments could do well to look to it for inspiration. This model strikes the right balance and will enable additional gas to be made available for market, bring jobs, investment and other opportunities to local communities, support local industry and avoid demand destruction through high prices or uncertain supply, enable gas to act as an important partner to renewable technologies and, importantly help to solve the east-coast gas crisis.”

If not elsewhere earlier, I think you can expect to hear more about the PC’s proposal when the Quest Events’ Australian Domestic Gas Outlook conference is held in Sydney at the end of February. (Preliminary details of the conference are on the Quest website.) It’s not an idea that should be just left to fizzle.

Present tense

This weekend I have been reading an English newspaper report on a leading football club manager complaining about “the knee-jerk British society in which the heat of the moment is all-consuming, the weight of the present is the only thing that matters and longer-term consequences are an afterthought.” How apt that is as a description of Australian society, too, and how often this effect plays out in our policymaking, fuelled by the popular media and, of course, social media – not least in recent times for energy,

In this “heat of the moment” environment the quite important latest report of the Productivity Commission has flickered briefly in our public discourse and then focus rushed on to other matters.

There are a number of areas where the commission’s review of Australian productivity deserves close attention. Energy is one of them. The PC’s acerbic perspective on the topic received brief media mention and is already seemingly lost under the “weight of the present.” After all, it is already almost week-old news………

The commission, warning that “the costs of getting the energy system wrong are just too large to contemplate,” calls for government co-operation on reforming the NEM to be a priority and sums up its recommendations like this:

Australian governments must:

› stop the piecemeal and stop-start approach to emission reduction and adopt a proper vehicle for reducing carbon emissions that puts a single effective price on carbon

› clearly articulate the acceptable trade-off between reliability and cost

› achieve more efficient pricing, by ensuring that prices paid to producers reflect any additional costs they impose on the system (such as frequency management), that access to the grid, rather than just use, can be priced (so people using the grid as a back-up pay for this service) and that prices to consumers reflect the nature of the demand that they require from the system

› provide clear strategic direction to the expert bodies and a clearer accountability for outcomes

› let the market regulators and participants get on with their work, holding them to account for the outcomes

› ensure that short-term fixes are technologically neutral and move the system toward a sustainable long-run outcome.

What prospect is there that CoAG leaders meeting next month will embrace this advice in full and set in train steps to implement it? In a word, zero.

Federal, State and Territory governments are deep in their energy/carbon war bunkers and “longer-term consequences are an afterthought.”

As Peter Harris, the PC chairman, puts it (I’m quoting from a report in The Australian), CoAG is “the place where good policy goes to die.”

In its commentary on energy (at page 159 of a 255-page review), the Productivity Commission says: “With electricity and gas making up 2.5 per cent of GDP, and being an essential input for all industries, the cost of failure to resolve the problems will only rise in the future. It is too difficult to put a price tag on getting energy policy right, in large part as the counterfactual — what would happen if we continue to try to muddle through without clarity on carbon pricing — is impossible to define. Nonetheless, the returns from (our proposed) reforms would be worth many billions.”

With a nod to the Finkel report, the commission adds “The issues affecting the sector are complex and their solution requires considerable technical expertise as well as good regulatory and institutional design. This requires solving the immediate problems, but also needs to be mindful of transforming the energy system so that it will deliver for consumers in the long as well as the short run.”

The PC calls on governments (ie CoAG) to: “restore national agreement on simple, clear objectives — that recognise the inherent tensions between prices (costs), reliability and emissions and provide guidance on acceptable trade-offs — then leave the field to expert implementation.” It adds: “determine which institutions do what — then let them get on with their work, holding them to account for their stated responsibilities.”

With respect to the last point, it also says: “The core of the regulatory architecture is three expert bodies — the Australian Energy Market Commission, the Australian Energy Regulator and the Australian Energy Market Operator. They respectively develop policy with governments, regulate and run the system. In theory, such institutions have the advantage for governments that they can moderate the inevitable political pressures governments face to act spontaneously given popular concerns. But in practice, insufficient use has been made of the independent expertise and public explanations of those three bodies when forming energy policy.”

Meanwhile, the media, having seized briefly in the past week on what is the most political of the commission’s energy comments (pricing carbon), have skittered away to other, momentarily more juicy topics.

Included in what the PC says is an observation that government agreement on 49 of Finkel’s 50 recommendations “is not a pass mark.” – and I add that between the CoAG Energy Council lip service and implementation of the 49 steps still falls a very large shadow.

The commission also declares: “A broadly accepted commitment on emission reduction targets over the investment profile for electricity assets is essential to give firms sufficient confidence to make the investments needed to deliver electricity at the lowest possible cost and the right levels of reliability for users over the next few decades.”

It says: ” It is a principle of every properly-designed pricing system that the charge should reflect its harms. Thus carbon emission intensity is necessarily a matter to be reflected in the regulated pricing system. The compromises necessary to do this are much-debated, but what should be accepted is that low carbon technologies (such as solar and wind generation) are inherently part of the properly-priced future.”

It buys in to the seemingly endless political fighting over a renewable energy target in this way: “The Commission has previously criticised the use of renewable energy targets (RET) on the basis that they are not technology neutral, and so are distortionary compared with the policy of putting a price on carbon. But we have also acknowledged they have been an important tool in delivering on emissions reduction commitments.

“Finkel’s recommendation for a low emission energy target (LET) would be an improvement on the RET. It would better reward lower emitters, and depending on its detailed design, would move Australia’s energy market closer to the outcomes that would arise from full carbon pricing.

“The critical point is that while there are various ways of placing prices on carbon, establishing an agreement on one of them, even if not perfect, provides a guide for investment toward the lowest cost emission reduction options. These costs must include any additional cost imposed on the network by choice of any particular technology.

“The RET is specified in terms of gigawatt hours of renewable electricity and not in terms of emissions. It was formulated and operates independently of wholesale electricity markets and is not explicitly incorporated into the spot price. This has created problems as it effectively pushes the cost of intermittency and frequency management onto the purchasers of electricity rather than onto the producers of renewable energy.

“While the low marginal cost of renewable generation means that these producers can sell into the grid when they were producing (as they would have the lowest priced bid), they do not have to pay for the reserve capacity of other generators that are needed when renewable production falls relative to demand. This may be a problem with any certificate-based scheme based on the production rather than the delivery of electricity. Prices need to be able to be based on not just when the electricity is delivered (by bidding into the spot market for five minute contracts), but also its availability.”

Coincidently, the commission’s review has paralleled delivery of a draft electricity market report to the UK government by Oxford professor Dieter Helm (their version of the Finkel report). In it, Helm comments: “The scale of multiple interventions in the electricity market is now so great that few if any could even list them all and their interactions are poorly understood. Complexity is itself a major cause of rising costs and tinkering with policies and regulations is unlikely to reduce costs. Indeed, each successive intervention layers on new costs and unintended consequences. It should be a central aim of government to radically simplify the interventions and to get government back out of many of its current detailed roles.”

Quite so.

UQ, IEA, SEA & us

Most of us, I know, are suffering from energy report fatigue at the moment but I have to tell you there is yet another substantial tome just published that should be of more than passing interest to Australian industry and policymakers.

It deals with energy developments in our neighborhood and is the third in a biennial series of reviews of the 10 ASEAN states.

On Thursday evening in Brisbane, its publisher, the International Energy Agency, unveiled it to an audience assembled by the University of Queensland at the latest iteration of UQ’s excellent “The Energy Exchange” series, presented in association with the Energy Policy Institute of Australia.

The economic health and social stability of the ASEAN countries is of considerable importance to Australia, not least because of our rivalry or co-operation, depending on the nation, in energy trade. How these countries source their energy needs is also going to play an increasingly significant role in global management of carbon emissions management — and this will play back in to one of the central issues of our local policy management, and of who governs Australia, out to 2030.

Two of the three critical issues for the ASEAN 10 are shared with us: access to reliable and affordable electricity, using it to fuel economic development, and emissions reductions. The third, which thankfully does not challenge Australia in the same way that it does China, India and the ASEAN countries, is air pollution, especially in big cities. As was pointed out at the UQ forum, this is a major health issue for our neighbors and one their governments are under rising pressure from their communities to manage far better.

The ASEAN nations’ urban population alone is projected to grow by 150 million — 30 Sydneys — in the next quarter century and their overall energy demand is expected to rise by two-thirds, representing a tenth of the total global increase. The impact of this on what we can sell abroad (not just volumes but values) — eg coal and LNG — and what we import (eg petroleum products) is not to be sneezed at.

Scenarios, of course, are just that — models of what might be, given cherry-picking by modelers of a raft of factors — and they are not (or shouldn’t be seen as) forecasts of what is going to happen, although they far to often get treated as such.

How such international scenarios are treated here as part of our endless local bickering about energy policy (eg over new coal mines) is not unimportant. The “death of coal” schtick, for example, looks decidedly odd when seen against the IEA’s main scenario in this new publication for a more than doubling of ASEAN production of power from the fuel between 2015 and 2040 — a rise of some 500 terawatt hours annually (for context the total New South Wales demand is about 70 terawatt hours a year).

Just to demonstrate the complexity of the debate, as noted by IEA energy analyst Ali Al-Saffar at the UQ forum, this rise is somewhat less than was anticipated by the agency back in 2015, but to portray the coal scene as plunging in to the abyss (a line peddled almost daily in our media) hardly makes sense when one sees such data.

The agency believes 100 gigawatts of new coal generation will be brought in to ASEAN operation (that’s about 80 Hazelwoods or Liddells), taking the region’s coal-burning capacity to some 160 GW as these countries more than double their total power output to around 2,220 TWh a year in 2040, riding a rise in coal-based generation of almost 600 TWh.

The IEA model also reckons on ASEAN power production from renewable energy rising by about 375 TWh annually but it needs to be pointed out that roughly half this increase is from a large conventional source, hydro power (a form of electricity supply the Greens & Co rail against, too).

Every time reports such as this latest IEA one appear, we have a deluge of media ooh-ing and ah-ing about green capacity developments. In this case, wind capacity does indeed shoot up 22-fold between now and 2040 and solar PV more than 12-fold, a massive investment — but the numbers that really matter are for production.

In its main scenario, the IEA now projects 2040 output by ASEAN coal plants at almost 900 TWh and gas plants at 630 TWh with hydro systems at almost 350 TWh — while wind farms deliver 55 TWh and solar 85 TWh. (One of the region’s real big spurts in green power production, apart from hydro, is geothermal — it is projected to more than treble to 75 TWh.)

One of the points the IEA makes in this report is that “coal maintains a strong foothold in (South-east Asia’s) projected consumption, not only because it is markedly cheaper than natural gas, but also because coal projects are in many cases easier to pursue as they do not require the capital-intensive infrastructure associated with gas.”

From a self-centred Australian perspective, it is interesting to see the agency also relying on a model where South-east Asia’s position as a net gas exporter is called in to question in an environment of flattening ASEAN production and rising demand. Being, as we are, a country that can make a substantial contribution to the neighborhood’s energy security is hardly a bad place to be — assuming we can get our own act together better than we have been demonstrating lately.

Something that should not be lost in looking at this review is the point the IEA makes about a strong approach to energy efficiency. The core scenario canvassed in this post sees the 10 countries needing to spend $US2.7 trillion between now and 2040 — and the agency points out that a commitment to pursuing efficiency could add just $US200 billion to this bill but halve the foreshadowed ASEAN level of carbon emissions, slash $US175 billion from the 10 nations’ energy import costs and contribute substantially to pursuit of better air quality, especially in their cities.

My point, really, is that, given where we live, this IEA report is not just about 10 other countries but also, to potentially quite a considerable extent, about us and, therefore, is deserving of some close attention here.

One of the considerable values I see in the UQ “Energy Exchange” events is the way the university keeps picking really worthwhile topics for attention and the way knowledgeable people demonstrate at these forums that Australians can talk without heat about energy trends and issues, a sharp contrast with the routine big fusses in our public debate with an over-supply of ranting and rhetorical flourishes.

 

 

 

Deal or no deal?

On energy (and much else), the Guardian newspaper is as green as grass, but a weekend commentary on the Turnbull government’s latest approach to energy policy by its Australian political editor, Katharine Murphy, contains this plea: “Can all the key players in our political system be grown-ups, rise above frustrations, past botch-ups and petty intrigues, come together to consider an issue on its merits and ultimately act in the national interest?”

Cynics will opine that, for this to happen, there will need to be an Olympic-standard triumph of hope over experience, but I am also interested to see another senior political writer, Malcolm Farr of News Limited, canvassing the prospect that the “national energy guarantee” may be a route to “peace in our time” after 10 years of “fractious debate and policy failure that have consumed five prime ministers.”

As one would expect, the hills and valleys of our media are alive this weekend with the sound of chin music on the NEG theme and much of it metaphorically will soon be wrapping fish and chips, but there are other bits in the public arena of some value.

One I recommend is the transcript of a Canberra breakfast forum organized on Thursday by the Australian Industry Group. Snippets from this event have appeared in the media but the full report of the presentation at the National Press Club by Malcolm Turnbull — and the ensuing Q&A session that also featured Kerry Schott, chair of the Energy Security Board, Audrey Zibelman of AEMO, John Pierce of AEMC and Paula Conboy of the Australian Energy Regulator — is worth reading. It’s on the media segment of the Prime Minister’s official website.

Turnbull told this forum that the new approach recommended by the ESB “will guarantee reliability, restore stability and confidence to the energy market” and “we can expect lower prices than under any other approaches.”

Do note the last bit.

The Prime Minister referred a little later to the NEG “placing downward pressure on wholesale (power) prices,” adding the ESB has told the government to expect wholesale prices to be 20-25 per cent below current forecasts in the period from 2020 to 2030. “Now, that is 8-10 per cent below what was expected under the Clean Energy Target and translates into an average $100-115 fall in residential power bills a year in the same period.”

Given the media penchant for beat ups via aggregating the impact of power bill rises – I recall The Age during the Gillard prime ministership actually using “shock” and “horror” in a headline about an aggregate rise of $40 million a year for Victoria’s two million residential accountholders – I am a little surprised that Turnbull & Co have not thought to point out that, at $100 a year per household, the NEG could deliver something like $8.5 billion in relief to NEM householders between 2020 and 2030.

And, while on this aspect, it was good to see Paul Kelly in The Weekend Australian calling out Bill Shorten & Co for being “brazen beyond belief” in bagging the lack of Coalition modeling of the NEG while continuing to duck producing economic analysis of their proposal for a 45 to 50 per cent renewable energy target for 2030. The sloth and incompetence of the political commentariat in not pursuing Labor relentlessly for this modeling has been a feature of the past two years of the energy debate.

Coming back to the AiG forum, the AEMC chairman had an interesting retort to a question about modelling the NEG.

“Models don’t give you truth, right,” Pierce said. “Good models give you a set of conclusions that are consistent with the assumptions you put into them but, more importantly I think, they teach us something about the relationships within what you’re looking at.

“And one of the things that I would hope would come from further work is the deeper understanding about how the mechanics of these (NEG) mechanisms will operate in the future.

“If I can have a bit of a personal vent,” he went on, “one of the things that has frustrated me about this debate for a long time is people forming views and judgments about the virtues or otherwise of different policy mechanisms based on what some model says will be the technology that will be on the ground in five years’ time, seven years’ time, 10 years’ time rather than will this policy mechanism deliver the policy objectives and are those objectives clear?”

One of the things about which we can be sure, Pierce added, is that the views around technology costs in 12 months, in 18 months and in two years’ time will be completely different and “that will give you a different result when you chuck it through these models.”

His appeal is for a focus on the NEG and how it works and whether it achieves the policy objectives “because that’s really the test, irrespective of whatever the future may bring in terms of technology costs or gas prices or coal prices or any of the other myriad of things that drive outcomes.”

Whether this sort of thinking can prevail among political leaders when the modeling the Coalition is seeking is delivered in mid-November for CoAG consideration remains to be seen. Our energy politics being as toxic as they are, the answer is probably not – but Murphy’s challenge can’t be answered unless this does happen.

Contained in the AiG forum transcript is this plea from Turnbull to the Labor opposition: “They don’t have to have the indignity of supporting a proposal prepared by me and Josh (Frydenberg) and Scott (Morrison) and Barnaby (Joyce). This has come from the Energy Security Board, established with outstanding leaders on it by CoAG. More Labor jurisdictions were part of that decision than Liberal ones. The (ESB) membership was applauded by the federal opposition.

“I think this is a real opportunity for Labor to say: ‘Well, we’ve always said we wanted to have a bipartisan approach. We got the recommendation from a board that was set up on the recommendation of Alan Finkel. It was established by CoAG. Let’s take their advice.’ I think it is pretty straightforward and it is about time for some commonsense to break through all the politics.”

This got him a challenge from the forum floor from the Guardian’s Murphy: “Are you going to stow the rhetoric, get people around the table and actually cut a deal on this stuff? Or are you going to basically comply with the wishes of some in the Coalition who just want another zero-sum pathetic round of blame shifting with Labor at the next election? What’s it to be?”

The response she got at the time (surprise, surprise) was waffle, but her question should have a life beyond that breakfast meeting – it goes to the heart of achieving a step change in this debate.

Are the Labor people up for it? Are Turnbull and his ministers?

The Prime Minister finished up the forum by appealing to the business community to get on the backs of the State and Territory governments to support the NEG.

Different politicians can argue about who is most to blame for the massive energy policy failure of the past decade, he said. Adding, in a quote the media picked up because they will always go for the biff: “Too much ideology, too much idiocy or absence of mind, whatever you want to call it. Let’s now use economics and engineering as our guides.”

And, reverting to statesman mode: “We’ve got some great advice from an independent expert board. Not appointed by the federal government – appointed by CoAG, so by all governments. We put them there to seek (their) advice. Let’s now take it.”

Let’s see what the month ahead now brings.

Fishy business

The quote of the year so far in what has been the most interesting period in our energy policymaking since the 1990s comes today from The Australian commentator Henry Ergas: “If there is a lesson from Australian energy policy, it is that it is far easier to make fish soup out of an aquarium than vice-versa.” I’ll pay that!

The new big fish in our aquarium in the Turnbull government’s “national energy guarantee” device, devilishly clever or diabolical depending on the stance of the observer.

Filleted down to its bare bones, the NEG aims to impose a reliability obligation and an emissions reduction obligation on energy retailers. John Pierce, chairman of the Australian Energy Market Commission and one of the advisers on the policy, summed it up at a forum in Canberra yesterday as “the (market) business that can produce the lowest cost reliable supply that meets the emissions target wins.”

The verdict of the nation’s power suppliers (delivered by the Australian Energy Council’s Matthew Warren) is that NEG is “a considered attempt to address the issues of reliability, cost and emission reductions from energy.”

The politically-important rural lobby, the farmers and food processors in areas that are a minefield for the Coalition at federal and State levels, speaking via the National Farmers Federation, sees the move as “promising,” emphasizing that what the Bush wants is whatever will bring down power bills.

The manufacturing lobby (via the Australian Industry Group) sees the plan offering a “plausible” policy direction to create conditions for investment in new generation and in factories. The Minerals Council says it welcomes the Turnbull government’s “acceptance of advice from the Energy Security Board that technology-neutral policy signals are needed to drive investment in reliable and affordable power supplies.”

“Our” ABC, so often the mouthpiece for the Greens and green-leaning opinion, uses one of its “investigative reporters” to deliver a website commentary that (a) the government wants us to believe it will “deliver the trifecta: no blackouts, less carbon dioxide emissions and lower prices” and (b) “there is serious room for doubt, but who really knows?”  The broadcaster asserts: “It’s impossible to make a definitive judgement because the policy, made on the run with obvious haste, is so sketchy.”

Other green lobbyists and commentators see the NEG as seeking to replace the Finkel clean energy target proposal “with a dirty one,” as the latest ploy of those conniving to depress renewables investment at the expense of existing fossil fuel generation and as potentially bad news for rooftop solar PVs.

University of Queensland professor John Quiggin declares: “The most important thing to understand is that (the NEG) is designed not to produce a sustainable and reliable electricity supply system for the future, but to meet purely political (Coalition) objectives for the current term of parliament. Those objectives are to provide a point of policy difference with Labor, to meet the demands of the government’s backbench to provide support for coal-fired electricity and to be seen to be acting to hold power prices down.”

Former Liberal leader John Hewson, now an ANU professor and a serial critic of his old colleagues, comments that the NEG “may yet prove to have been clever politics by Turnbull, both within his government and against Shorten, but any sort of medium-term guarantee is unlikely to impress voters who will have to live with further increases in their electricity prices and face the insecurity of possible blackouts for at least the next few years – certainly before the next election.”

The official opposition, federal Labor, allowed its knees to jerk vigorously for a day or two and has now settled in to calling for modelling to validate the claimed reductions in power prices and energy-based carbon emissions.  (There has been much Labor mocking this week of the government claim of a saving of $115 a year in household power bills; I’m a little surprised the federal government has not responded by drawing attention to Julia Gillard’s 2012 promise of a $250 annual saving from her “big stick” approach to networks plus pursuing smart meters and reliability standards; you’ll remember how well that went………..)

Malcolm Turnbull, in a radio interview today, has put his finger squarely on the big “if” of his new policy. “Clearly,” he said, “ we need CoAG cooperation. It’s got to be a CoAG mechanism.” Yesterday, at a forum in Canberra, he was asked  “What happens if the States simply say no?” His reply: “Let’s focus on getting them to say yes. The Energy Security Board was established by the States and the Commonwealth – it is a COAG creation.” To which he later added as a challenge to federal Labor: “This is a real opportunity for Labor to say: ‘Well, we’ve always said we wanted to have a bipartisan approach. We (have) got the (NEG) recommendation from the board that was set up on the recommendation of Alan Finkel. It was established by COAG. Let’s take their advice’.”

Josh Frydenberg has now written to the State governments, whose energy ministers were left out of the loop as the Coalition formed the NEG approach with the ESB’s input (because obviously they would have played political games to stymie the announcement), inviting their input to the next steps, including modelling of impacts.

His opposite number in federal parliament, Labor’s Mark Butler, meanwhile is saying it doesn’t matter whether he opposes the policy at this point because a State veto (via CoAG) will negate the NEG. Some political reporters are adding that, with difficult elections looming in Queensland and South Australia, a stoush with Canberra over energy may just be what Labor premiers Palaszczuk and Weatherill need – but the Canberra Times, in an editorial, is talking about feelings among Labor’s federal frontbenchers that it will be “unconscionable to have more trench warfare (about energy policy) that could extend to the next election and beyond.” At this level, the paper claims, there is an urge to “get off the energy merry-go-round.”

(All this raises an interesting point: if baulked in CoAG by the Labor States, could the Turnbull government legislate federally to make the NEG law? The Energy Policy Institute suggested back in March that “the door is open” for a National Energy Commission to be introduced via federal legislation, dismissing the CoAG Energy Council as “cumbersome, outdated and sub-optimal” and calling for Australia to “throw off the chains” of co-operative energy governance.)

A CoAG meeting next month will be the first formal opportunity to put the issue of co-operative federalism on the NEG to the test. Clearly, there is lots of room for more fishy business in energy politics despite the heartfelt plea from the Canberra Times that “pragmatism, not ideology is needed.”  The paper adds: “What is on offer is far from perfect. That said, many believe it will create a framework that can be improved and tweaked in the years ahead. It is also the only alternative to a dysfunctional mess that is likely to be on offer in the forseeable future.”

Last word: The Prime Minister, speaking at an AiG function on Thursday made this observation (which I haven’t seen picked up in the media):”The NEG is not going to bring down the price of gas. The price of gas is determined, and I repeat it for those who doubt it, is determined by supply and demand – like the price of everything else.” Hardly a minnow in the electricity policy aquarium, this point.