Doing it by numbers

As always, the International Energy Agency’s annual Key World Energy Statistics is a cornucopia of data, ripe for cherrypicking to suit anyone’s interests or need to make a point.

Something that catches my attention each year is the comparison the agency draws with the 1970s (which were a time of major geopolitical turbulence created by energy issues). In the case of coal use, for example, the IEA reports that last year saw 7,269 million tonnes produced — compared with 3,074 Mt in 1973. The part of the pie-chart on this aspect that immediately draws my eye is how the Chinese share has soared from 13.6 per cent to 44.5 per cent while the overall OECD share has fallen away from 55.6 per cent to 23.7 per cent. All sorts of angles strike me in looking at this — like the fact that the greet green exemplar to us all, Germany, last year produced 176 Mt of coal and was still a net importer of 53 Mt.

The Germans have spent $US780 billion on subsidies for green electricity in the past decade with the aim of cutting their carbon emissions in 2020 by 40 per cent below the 1990 level. Thanks in no small measure to forcing out nuclear power and having to rely on 140 coal-fired power stations, the outlook is that Germany will achieve no more than a 30 per cent cut at the decade’s end — but this is not creating a screaming political row there in the elections that reach their denouement on Saturday. This may change if Angela Merkel is forced to pursue the so-called “Jamaica coalition” — with the Greens and Free Democrats — because the Greens are demanding the closure of 20 coal plants as the price for their support.

Coming back to the IEA document, another segment that interests me is the breakdown of global electricity consumption by sector. The agency chooses to render this in millions of tonnes of oil equivalent and in this issue compares 1973 and 2015 (it is notoriously hard to round up all the data for the immediate past year, so this stuff always lags — something journalists here seizing on the power price data in this publication should bear in mind; the Australian figures are not current). The agency pie-chart shows that global power demand has soared from 440 mtoe in 1973 to 1,737 mtoe in 2015 — and in this time heavy industry’s share of consumption has fallen from 53.5 per cent to 42 per cent while residential, public service and commercial consumption has gone from 38.2 per cent to 49.3 per cent.

With the endless focus in our local public debate on the role of coal, and especially its use for power generation, it is worth noting the global shares of coal use in 2015: iron and steel 29.3 per cent (a big rise from 17.5 per cent in 1973), chemicals and petrochemicals 10.5 per cent (a tripling of the 1973 share) and non-metallic minerals 22.2 per cent (a five-fold increase). Prating about the “death of coal” in this context is pretty silly, really. (It’s also worth noting, I suggest, a commentary in this week’s London Financial Times pointing out that the IEA seems to be now predicting “a long plateau” in coal use, with demand stable at around today’s level of 160 quadrillion BTU out to 2050. Very sensibly, the writer goes on to comment that “no one should put too much faith in (such) long-term projections.” I wish his peers here could show more understanding of this point.)

Elsewhere in the IEA publication, I see its calculation that the latest (2015) estimate of global electricity consumption is 24,255 terawatt hours (our Australian total is 250 TWh, less than half of what is used each by the South Koreans, French, Brazilians, Germans and Canadians and a fifth of the Japanese and Russian totals). The share of electricity regionally has changed very markedly since 1973 — when the OECD countries dominated with 72.8 per cent and now have 44.7 per cent. China accounted for just 2.9 per cent then and now uses 24.3 per cent of all electricity. Non-OECD Asia’s share has jumped from 2.7 per cent to 11.3 per cent.

A moral of all this is that the world is a very big place and that, in our own power consumption, we play a pretty small role — while at the same time, of course, playing a pretty big one in terms of our coal, gas and uranium exports to help the international community with their energy requirements.

There’s another set of data in this agency publication that is worth focus: of the 24,255 TWh consumption of electricity, 9,538 TWh is sourced from coal plants, 5,543 TWh comes from gas plants and all forms of renewable generation contribute 5,534 TWh. In a pie chart, the agency points out that in 2015, coal generation met 39.3 per cent of power production, gas 22.9 per cent, hydro power 16 per cent and nuclear 10.6 per cent, leaving a share of 7.1 per cent for non-hydro renewables and waste.

In this great scheme of things, solar PVs contributed 247 TWh (of which 6 TWh was generated here in Australia) from an estimated 220,000 megawatts of capacity.

Wind power delivered 838 TWh in 2015 from 414,000 MW of capacity.

By comparison, hydro-electric power delivered 3,978 TWh from 1,205 MW, of which a quarter of the dams systems are to be found in China.

(By the way, what’s the country with the largest hydro share of domestic electricity generation?  The answer is Norway — 95.9 per cent — with Brazil at almost 62 per cent and Canada at almost 57 per cent. The latter number is worth bearing in mind when local media, as The Australian has done today, make a fuss that our electricity bills are double what Canadians pay.)

My nuclear friends would not be happy if I failed to also point out that their favorite generation source accounted for 2,571 TWh of global production in 2015 from 383,000 MW of capacity. (The reactors’ share of Canadian supply was 15 per cent, giving that country 72 per cent of non-carbon power from dispatchable sources versus 3.9 per cent from wind turbines. The Canadians got 26 TWh from 11,200 MW of wind capacity in 2015. The neighbouring US got 193 TWh from 72,600 MW of wind farms in 2015 compared with 830 TWh from 99,000 MW of nuclear plants.)

And finally, it always interests me to see how the IEA slants its media commentary when it publishes this stuff. The lead sentence for its media statement about the Statistics publication says: “China is the world’s largest consumer of coal, but it also has more wind and solar generation than any other country.” I could think of five or six other ways to introduce this document that might convey a rather more balanced view of the big energy picture. From the agency’s membership perspective, for example, it might  have highlighted somewhere that these 35 nations (including us) accounting for well more than four in every 10 electrons produced around the world have a generation mix that now stands at 28 per cent for each of coal and gas, 18 per cent for nuclear, 13 per cent for hydro and 11 per cent for all the forms of non-hydro renewables.



Liddell manoeuvres

In a month in which the editor-in-chief of The Australian Financial Review has declared the “energy crisis” to be “the biggest national and business story of the year,” the speed with which the fate of Liddell power station has gone from being fait accompli in the much-discussed decarbonizing transition of the NEM over the next decade to an overnight cause celebre in the political power game is eye-opening (and pretty depressing).

In the past week’s political and media wildfire, Liddell’s owners, AGL Energy, are being presented as having caught off guard.

Whether this furore should have done so, and the impact of the past few days’ headline-hogging fuss on AGL Energy’s reputation with the community, is a matter for private reflection by the company’s board at some point – but its here-and-now task is how to manage its very public confrontation with the Coalition government leadership. More broadly, the energy supply industry’s task is to campaign against yet more ad hoc policymaking.

In the latter context, I think the most helpful thing politicians and others could do this weekend is to sit down for 15 minutes to watch a televised interview between the ABC’s Elysse Morgan and EnergyAustralia’s energy executive Mark Colette on The Business program. Put to air on Wednesday this week and still readily accessible on the ABC website, it is the most sensible and clear exposition of supply options available, covering not just the Liddell fracas but also the threat via green activism to EnergyAustralia’s 1,400 MW Mt Piper power station in the upper Hunter Valley, a generator of 12,000 gigawatt hours a year — an issue Colette points out for which there is a ready-made technical solution and more urgency for it to be pursued because the plant could be driven to close far sooner than Liddell.

It should be noted that the politically-contrived Liddell “crisis” may not have found AGL as flatfooted as some journalists obviously assume. The reason for saying so lies in the company’s recently-published annual report via opening comments from CEO Andy Vesey.

“We are undertaking a detailed State-by-State assessment, starting with New South Wales and Victoria, of Australia’s potential energy generation supply and capacity requirements from now to 2025,” he wrote. “This will pay particular attention to replacing energy and capacity currently supplied by Liddell, which will reach the end of its life in 2022.”

Vesey added: “Our assessment will inform the nature and scale of AGL’s future investment in low emissions generation and storage technologies. It will also offer insight in to how AGL should make those investments to ensure we deploy shareholders’ capital responsibly in the context of the significant uncertainties we face in both regulation and technology.”

What has also been lost to sight in the past week’s politics/media frenzy is the mindset AGL brought to the purchase of Liddell in the first place. Here is what the chairman, Jerry Maycock, now retiring from the board, told the company AGM in October 2014: “In our (purchase) valuation model, we assumed Liddell would close in 2017 because of the possibility that one of (our) major customers, Tomago aluminium smelter, may close. If the smelter remains open, Liddell will continue to operate.”

Tomago, one of the more cost-efficient smelters around the world, has so far remained open. Aluminium prices are not at the dire levels they were a few years ago – but the very high local wholesale power prices pose an ongoing threat to its viability.

At the AGM in 2015 Maycock directly addressed a point that is now being used by some politicians and some in the media to howl “hypocrite” at his company. “The profits and cash flow from (our) coal-powered generators will enable us to continue to invest in renewable assets if and when the investment climate improves (and) as well (is) funding investment in new digital technology and energy storage products.”

From all this it is not unreasonable to assume that AGL’s board and top management have been walking in the storm-tossed transition woods with their eyes open although perhaps they could not have foreseen themselves in today’s melee, a sudden product of Malcolm Turnbull’s rather desperate political needs.

(Commenting on the situation, EnergyAustralia chairman Graham Bradley says: “The Prime Minister is having to turn over every rock he possibly can to find the best solution to what is a terrible policy mess that has been created by a decade of bad decisions by both State and federal governments.”)

One can also see a certain irony, given current events, in a comment by Maycock to AGL shareholders at last year’s AGM: “It is necessary to ensure that the transition to a low-emissions electricity system occurs in an orderly rather than disorderly way.”

Whatever, as my grandchildren say. AGL’s board and MD now find themselves caught in the horrid glare of media and political attention with a 90-day deadline to come up with a game plan for delivering a path forward on generation capacity that fits with their future planning and their shareholder interests —  and doesn’t leave Turnbull further exposed politically because that will only put the company more in harm’s way.

The company’s preferred approach, as recently again outlined by Vesey before the current game kicked off, is not to go for a new coal plant or baseload gas to replace Liddell “but a mix of energy from wind and solar, along with load shaping and firming capacity from sources including battery storage, pumped hydro, demand response mechanisms and gas peaking plants.”

In this regard, Colette’s lucid explanation in his The Business interview of the wide-ranging options available and being pursued, especially by the big gentailers, is strong reinforcement for a more rational approach to the situation by policymakers.

Pared down, Turnbull’s political need should be to demonstrate that there is a viable plan for the NEM to have available by the decade’s end 8,000 gigawatt hours of dispatchable electricity (Liddell’s annual output) to ensure that the market’s security is not impaired by losing this level of non-intermittent production in addition to the 12,000 GWh foregone when Victoria’s Hazelwood shut in March this year.

(As it happens, AGL has on its files a fully-fledged plan to build a 2,000 megawatt power station on the Bayswater B site, approved by the last NSW Labor government in 2010 for Macquarie Generation, which it then owned, to burn either coal or gas. This project was designed to produce about 20 per cent of the State’s power needs and intended to be in operation by the end of this decade at the latest. In its gas-fired mode, the development would feature five 400 MW units. If coal-fired, it would involve two 1,000 MW units. This project design work, of course, was undertaken well before the current HELE coal technology was in commercial vogue or battery storage possibilities became top of mind.)

Over the early weeks of spring ahead of us the political heat, thanks to the government’s Liddell manoeuvres, seemingly falls on AGL. (“The ball is in their court,” said Josh Frydenberg, an accomplished tennis player, even as his leader was accusing the company of greed in parliamentary question time.)

But other players are jostling to get on the court, not least the Australian Competition & Consumer Commission. Its chairman, Rod Sims, is due to make a speech in the week ahead that is being anticipated in the media as a blast for vertically-integrated supply (generation and retail) and this will be followed by the ACCC’s interim report to the federal government on 27 September on the competitiveness of NEM retail power prices.

From above the arena, however, the most immediate community challenge – even though the one politically for Turnbull is now the self-imposed Liddell problem plus settling the Coalition’s internal shenanigans on energy policy – can be seen to be security and pricing of supply in the NEM this summer, especially in Victoria, NSW and South Australia.

Whatever AGL puts on the table with respect to Liddell (or alternatives to its share of supply) and however Turnbull & Co react to it, the issue with biggest near-term ramifications for consumers, governments, the Australian Energy Market Operator and the generators is how the production and delivery system deals with the inevitable summer heatwaves that lie just ahead.

Postscript: The latest opinion poll in Essential Report shows that 35 per cent of respondents think neither the Coalition nor Labor can deliver lower energy prices – and another 18 per cent don’t know what to think. Only 19 per cent of those polled believe the Turnbull government can provide lower bills – versus 28 per cent for Labor. Alarmingly for the gentailers, 86 per cent of those polled think electricity and gas prices should be regulated. Naively, 56 per cent favor government (which ones?) buying back coal-burning power stations from the private sector and 51 per cent want to “stop coal-fired power stations from closing down” while 81 per cent want to “increase investment in renewable energy and storage.” The degree of community energy illiteracy this represents is quite something, don’t you think — and it feeds in to a political fire that could run out of control in the opening months of 2018.

Big stick & big picture

I attended the business forum lunch in Sydney in August 2012 when Julia Gillard, in political strife over power prices (conflated by her opponents with her carbon tax), threatened to “take a big stick” to the electricity networks.

Five years later Malcolm Turnbull is wielding the prime ministerial stick with vim in an environment where power prices are much higher than they were in 2012 while his opponents and many in industry pursue him to introduce a carbon energy target.

Just how dangerous it is for political leaders to make promises about electricity bills can be demonstrated by a reminder: in December 2012, Gillard told Australians (after a much-hyped CoAG leaders’ discussion on energy) that a NEM-wide pursuit of household smart meters and time-of-use charges plus a national standard for network reliability would save the mass market $250 a year for each home – a headline promise that has failed to deliver to the tune of billions of dollars for households in aggregate over the past five years.

Five winters of discontent later, Turnbull’s own big stick approach embraces:

  • A legislated ban on networks challenging regulatory revenue decisions through the courts
  • Sooling the Australian Competition & Consumer Commission on to major energy retailers (the villains du jour) for examination of how they frame their charges – and personally hauling retail leaders in twice to demand action to herd householders towards taking up cheaper contracts
  • Running a major review via Alan Finkel’s task force which has seen CoAG commit to 49 recommendations for market change
  • Floating a proposal for the federal government to acquire the assets of Snowy Hydro from Victoria and New South Wales plus making qualified commitment to build “Snowy 2.0”
  • Leading a move to interfere in LNG exports in an effort to force more gas in to the east coast domestic market
  • Taking the most recent headline-hitting step in the form of pressuring AGL Energy to continue operating Liddell power station beyond its closure point of 2022 or to sell it to someone who will.

The mind boggles at what could eventuate politically if this summer does bring further supply problems, especially in Victoria and New South Wales.

Meanwhile Turnbull points to “10 years of colossal policy failure” and adds that the stability and security of east coast electricity supply has been reduced by pursuit of intermittent renewable energy at the expense of 24/7 dispatchable power “without very much thought,” denouncing the “ideology and idiocy” that has brought us to this point.

“There has been too much energy policy debate,” the Prime Minister declared at a mining industry dinner in Canberra, “built on glib slogans, on ideology, with political arguments with no basis in fact or reality.”

His government, he avers, is determined to base its approach on economics and engineering and to pursue a “policy trifecta” of affordable, reliable energy able to meet national carbon emissions reduction goals, embracing solar, wind, gas, hydro power “and, of course, coal.”

Lost in the wash of political brawling and media hyperbole in the past week has been a careful assessment of the wholesale power market situation and the latest Turnbull government thrust on generation by the Australian Energy Council CEO, Matthew Warren, representing generators and energy retailers.

“To manage system reliability and affordability, the market operator may want to buy some time and seek to extend the life of some (coal) generators,” Warren writes on the AEC website. “That may be a sensible and cost-effective solution.”

But, he goes on, “each power station is different – some will be better suited to this (life extension) option than others.” Decisions about whether or not to extend the life of any existing generator will need to be made on a case-by-case basis and as part of a national energy strategy.

Warren adds: “The cost of extending the life of old coal and the terms under which (such plant) would run need to stack up against competing technology solutions to do the same job. The whole system would need to reflect the emissions reductions targets agreed by successive governments.

“If it is not commercially prudent for the owner of a power station to re-invest millions of dollars to extend its life, then who should pay for it? How do we make sure this is the most efficient investment? What are the other options and what would they cost? Would (these extended-life plants) remain in the market or form part of a strategic reserve? In this case, how would (such) plant remain viable?”

These are questions the federal government should address and quite quickly because waving big sticks is not a solution, only a gesture. They are questions that need to be initially considered by economists and engineers before political decisions are made.

However, the space available for decisionmaking is shrinking, given the lead times power projects require (including upgrading existing plants). As the market operator says in its latest review of the NEM, noting the proposed Liddell closure in 2022, “time is of the essence to obtain the appropriate level of resources to support overall system reliability.”

Which raises another question: do the federal government and the CoAG Energy Council believe they have been fully and properly briefed on the complexities of the relationship between adequate system strength and the combination of synchronous and non-synchronous generation in the NEM, and especially the three southern mainland States? Back in April I recall CSIRO making the point that effective market-based approaches need to be developed to provide assurance of capacity, balancing and ancillary services important to system security. This is an issue that extends to the meshing of high voltage transmission and generation across the NEM, bringing in the links with Tasmania and Queensland.

Can CoAG be sure that what is being pursued politically (in Canberra and the States) will provide the right underpinning for the strength of the grid (and therefore ultimately the cost of the power supply)? Is this a task for the new Energy Security Board, a product of the Finkel review, and when might governments have advice?

The challenge here is particularly potent for the federal government. Its task is to hold the ring that is the NEM for the benefit of the community and the economy as a whole. States, as they keep demonstrating, will always pursue their self interest regardless of what Paul Keating dubbed “the big picture.” As the gas imbroglio, a core part of the issues of power security and cost, continues to demonstrate, State (and territory) political leaders will also ditch the interests of their own communities to maintain a grip on government in an environment where green activism and the social media carry so much clout in key seats, as witness the unscientific bans on new gas development.

Turnbull is right to say that a problem – the “energy crisis” – years in the making will take years to resolve but there also needs to be recognition that each additional misstep now further erodes our capacity to climb out of the power pit we are in.

The Australian’s Paul Kelly may well be right to say this past weekend that it is the credibility of Turnbull’s energy policy for the long run that will decide whether the issue can work to the Coalition’s advantage at the next federal election – but the temptation is always there for leaders to reach for the “big stick” for political gain rather than to ensure their policy’s foundations are strong.

Watch this space

Whether you are Malcolm Turnbull or Joe Citizen, fitting the gallons of energy stuff going on in to the pint pots of time we have available, to use the pre-metric lingo (it really loses its impact if you have to refer to 3.78 litres in to 0.47 litre pots!), is a constant challenge.

This is especially true for the electricity scene. Most consumers, I suspect, just let 99 per cent of the goings-on wash over them and focus on what they don’t like (prices); those of us dealing with the bigger picture find it an increasingly large ask to give meaningful attention to all the useful information (while ignoring the huge amount of dross available in mainstream and social media).

I’ve always liked the metaphor of trying to get a drink under a waterfall while holding a tin cup.

In getting my act together in the past week for the September issue of Coolibah Commentary – just published on this website – I have finally focused on TransGrid’s 2017 annual planning report, a document I have followed with close interest for most of the past quarter century but have not visited except in passing this year and then only through one of the company’s presentations at Australian Energy Week conference in July.

As always, the report contains a wealth of information about the largest electricity supply region in the country (home to 3.6 million customers, large and small, or 38 per cent of the NEM). And it is a timely reminder, to anyone knuckling down to read it, of the many troubling facets of just the generation and delivery aspects of the market.

I make a point at conferences of reminding audiences that power supply is a chain and every link is important – but it is undeniable that production and delivery of electrons to the load centres is the sine qua non of the process.

How interesting it is, then, to read some of the core comments in this year’s report.

TransGrid (which is now in private hands under a 99-year lease from the New South Wales government) kicks off by reminding us that last summer was the first time in 12 years that the State’s maximum demand could be met only by curtailing the load, an “issue of significant concern,” and it makes the big call that, with respect to maintaining reliable, affordable energy, the NEM as a whole has “clearly failed those it is meant to serve, all consumers.”

I am looking forward to hearing this issue of whether or not the 20-year-old east coast market has failed discussed at the NEM Future Forum I am co-chairing for Quest Events in Sydney at the end of next month.

In NSW, TransGrid goes on, energy consumption and maximum demand are expected to grow further after rising for each of the past three years. And here’s the rub: “Retirement of baseload power stations will reduce firm generation capacity in NSW and put the power system under pressure to reliably meet the State’s maximum demand.” As the company says, new generation, greater interconnection, storage and demand management will all be needed to provide additional capacity to assist to meet the peaks – and, one must add, to help put downward pressure on a significant component of mass market bills.

There are several time frames to consider in this context. One obviously is the summer ahead – where maximum demand may lie between 12,600 megawatts (which it did in the summers of 2014 and 2015) and 13,900 MW (last summer) or 14,200 MW (where it hasn’t been since 2011).

Another is the next couple of years because any adverse events (whether related to security or affordability of supply) will play in to the next federal and NSW elections (the latter falling just after summer 2019).

The longer horizon is out to the middle of the next decade – which is the one used in TransGrid’s planning review and which is expected to see the closure of the 2,000 MW Liddell power station in 2022 perhaps followed by the 1,320 MW Vales Point plant, which reaches its 50th birthday in 2028.

The challenge, succinctly put by the company, is that, “when replacing baseload generation with variable generation, around two to three times the installed capacity is required due to the variability of wind and solar resources.” This, it says, means around 10,000 MW of new renewable generation will be required over the next 10 years – the assumption obviously being that no new fossil-fuelled baseload will be constructed and that the residual coal-burning plants will not be upgraded.

The Australian Energy Market Operator in its “stocktake” of the NEM delivered to the government this week notes that the supply shortfall risk in NSW increases when Liddell closes and asserts this can be mitigated by development of more renewable generation – the issues being, of course, the impacts on reliability, security and cost of supply.

The AEMO report notes that there is currently 16,193 MW of generation capacity in the State – of which 10,160 MW is coal-burning, 2,121 MW uses gas, hydro accounts for 2,706 MW, wind 665 MW and large-scale solar 254 MW.

The operator says it is aware of 5,834 MW of proposed capacity development – of which 4,466 MW are wind farms and 837 MW utility-scale PVs. This does not include the $2 billion(?) Snowy 2.0 project towards which Turnbull last week threw $8 million in feasibility funding.

It’s worth tossing in here a warning from TransGrid: “the best (intermittent) renewable resources (in NSW) are in areas with limited transmission capacity.”

(It also should be well noted, I think, that AEMO acknowledges “uncertainty in all NEM forecasts remains extremely high, so all estimates of reserve requirements must be regarded as subject to progressive refinement.” Quite so.)

Meanwhile, as Turnbull has revealed in federal parliament today, the federal government is in talks with AGL Energy about what it would take to fend off the company’s plan to shut Liddell in 2022 and keep it operating “for at least another five years.”

As well, in a contribution to lobbying on the State situation, the NSW Minerals Council has released details of an opinion poll in the Upper Hunter region (the heartland of the State’s power supply) that shows 67 per cent of respondents would support construction of a new low-emissions coal plant in the area. The council’s CEO, Stephen Galilee, argues that a new HELE generator in the region “would lock in NSW energy needs for decades” while producing power with 25 per cent lower emissions than Liddell.

I suppose that, if you wanted a catchcry for this situation, and for the NEM as a whole, it should be “watch this space” – but, as the TransGrid planning report underscores, the need for policymakers (and, surely, especially the State ones) to genuinely resolve the future framework for supply in NSW could hardly be more pressing. Throw in South Australia and Victoria, where the supply problems are no less worrying, and there are some 6.4 million mass market accountholders alone who are caught up in the present ride on the edge.

The siren’s call

I would very much like to back our most egregious political players in the east coast energy system – notably but not solely Andrews & Co in Victoria, Palaszczuk & Co in Queensland and Weatherill in South Australia – in to a corner and not let them out until they have explained precisely what they are trying to achieve (apart from pursuing vote-catching) and have supported their actions with believable expert assessments.

This, of course, is not just an issue for eastern Australia. The same demand could be thrust at successive governments in the UK, administrations in North America and some in Europe.

The vogue right now is for helicopter reviews of power systems – such as Finkel here, Dieter Helm (just starting) in the UK and, interestingly for us (because of the resonance for our own set-up), the just completed review of the American grids by the US Department of Energy, ordered by Secretary of Energy Rick Perry, the former governor of Texas (a state that can be held up as having made a not unreasonable fist of pursuing a competitive, stand-alone electricity market).

The 187-page DoE report, delivered in the past week, is acessible on the Web and can also be seen through the lens of a multitude of critiques quickly published in reaction to it.

I thought one US commentator did a good job of summing it up in this fashion: “The review caused great trepidation among solar and wind advocates because Perry (previously) had singled out the importance of nuclear and coal – a favorite of President Trump – in maintaining grid reliability. In the end, the study said the sharp decline in natural gas prices over the past decade is the primary reason US coal generation has become less economic rather than the spread of wind and solar. The report also found that wind and solar, which provide power intermittently, have not caused any insurmountable problems in the grid’s functioning – yet.”

In a background briefing, an unnamed DoE official told a major American newspaper: “While no day-to-day reliability threats loom in ordinary circumstances, this report is meant as a warning that the nation’s electric grids and systems are at a pivotal point. The replacement of coal plants by gas and intermittent wind and solar generation, and the spread of new digital controls, means the grid’s future resilience cannot be taken for granted. The report doesn’t say coal plants are necessarily required for maintaining reliability but underscores the importance of how various kinds of power interact to affect reliability and resiliency.”

To which one of my friends, who is an expert advisor to a government in Europe, adds in an email over the weekend: “If you scan the report with no preconceptions, the message that comes through clearly is that the USA has a very diverse electricity generation system, including a lot of hydro-power and nuclear, which provides enormous resilience through that diversity.”

Robert Pritchard, executive director of the Energy Policy Institute of Australia, in a note to his members shared with me, has done a yeoman job of encapsulating the DoE document in four points:

  • The continued closure of traditional baseload power plants calls for a comprehensive strategy for long-term reliability and resilience.
  • States and regions are accepting increased risks that could affect the future reliability and resilience of electricity delivery for consumers in their regions.
  • Hydro power, nuclear, coal and natural gas power plants provide essential reliability services and fuel assurance critical to system resilience.
  • A continual comprehensive regional and national review is needed to determine how a portfolio of domestic energy resources can be developed to ensure grid reliability and resilience.

You don’t have to be Einstein to see how this translates in to some messages for the NEM down here, bearing in mind, of course, that we have gone on denying ourselves access to nuclear power past any point of commonsense despite our substantial uranium resources and international developments in technology, we have created a major wholesale power problem with a hysterical reaction in some quarters to gas exploration and development, the storage issue (batteries and hydro) is still up in the air even as some governments chase high levels of intermittent supply – as is the question of greater interstate interconnection – and we seem incapable of discussing advances in coal generation technology without descending to a Punch & Judy show.

The past week has been also notable locally for a ferocious blast for energy policymakers from Tom Parry, former chairman of the Australian Energy Market Operator and before that of the New South Wales regulator, IPART. If you haven’t read it, I recommend doing so. See “Expensive power: brought to you by 20 years of bipartisan federal/State failure” in The Australian.

In his op-ed, Parry declares: “Reliability is now subject to much greater stresses as the mix of generation plants has changed and transmission networks have not adequately adjusted. And the once world-leading NEM, developed some 20 years ago, as well as the three national market bodies that are responsible for the NEM, are now being seriously questioned as to whether the model is still fit for purpose.”

In this context, I am also taken with a comment in a recent paper by Tony Clark, a Washington DC lawyer who was an Obama-appointed commissioner at the US Federal Energy Regulatory Commission after a career at state level as a utility regulator. He writes: “States need to be clear about their goals and take the responsibility of pursuing them. While it can be alluring to think one can maintain the benefits of a restructured market while also reflecting your generation winners and losers, I have come to the conclusion that it is a siren’s call best left unanswered. There may be plenty of reasons a state might wish to exert more control over its generation mix, some of them legitimate, but it must not (be) done haphazardly.”

Readers are no doubt aware that synonyms for haphazard include disorderly, hit-and-miss, arbitrary, slapdash and slipshod, every one of which can be applied to the processes that have brought us locally to where we are today. In fairness, via the Finkel review, the Turnbull government is trying to extract us from some of the worst problems policymakers have caused – but its clean energy target hassles re-ignite the haphazard epithet as do the actions of other jurisdictions.

The siren’s call to mess with the east coast electricity market, as well as the gas market, in pursuit of picking winners in a populist contest is still ringing loud over what Parry derides as our ongoing race to the bottom.

Sauve qui peut!

One of the ironies is that creation of the east coast electricity market (the “NEM”) two decades ago was strongly influenced by the desire to take politics out of power supply, leaving it to competition between suppliers to dictate what new infrastructure was built where – and, it was widely assumed at the time, ensuring through much greater efficiency in the private sector that inevitable price rises would be kept to a minimum.

For a relatively brief time – between 1998 and 2008 – this brave new world seemed to be delivering as planned and then politicians started intervening again.

An enduring public myth is that intervention will lower power bills when, all along, what is really anticipated (within governments) is that rises in consumer bills can be more constrained by political action. Paradoxically, the more evidence there is that such scheming makes things worse, the more politicians are driven to interfere.

In 2017 the interaction between politics and the east coast energy marketplace has blown up this conceit big time – thanks to interventions piled on interventions, the inevitable reactions of investors and, more recently, the macro world of engineering colliding with the machinations of political mice.

The east coast situation is made all the more complex by the fact that multiple governments are involved in energy policy and, when elections loom, the default position for each, to pinch the French phrase, is “sauve qui peut!” (“Save yourselves, whoever can,” the infamous cry of Napoleon’s Old Guard as they cut and ran at Waterloo.)

The other wrinkle in today’s NEM prices crisis is that “sauve qui peut!” is essentially the cry being directed by the federal government to residential consumers. Even as the body politic turns on energy retailers – via both the Victorian government’s push towards re-regulation and the federal government’s recourse to the big guns of the Australian Competition & Consumer Commission – the top-level message to households is still that their first, best hope for lower bills lies in their own hands.

Federal Environment & Energy Minister Josh Frydenberg has a detailed dissection of the current security and price situation in today’s The Australian in which his most salient point is that half of east coast household accountholders – that is more than four million bill payers in South Australia, Victoria, New South Wales and Queensland – have not moved retailers or contracts in the past five years (when the price spikes have really hit the political and media fan). “This,” writes Frydenberg, “is despite savings of more than $1,000 a year being available to those who secure a better deal.”

The minister claims “important progress” is being made in addressing this situation through the recent meeting between energy retailers and Malcolm Turnbull, Scott Morrison and himself.  This progress, he asserts, flows from the retailers being driven to providing better information to households. “The government’s campaign to shine a light on the behavior of retailers,” Frydenberg adds, “has caught the public’s attention, with a record 150,000-plus visits to the Australian Energy Regulator’s price comparison website.”

There’s an element in all this of that constantly-aired TV advert for the lotteries with cartoon characters driving a truck over-laden with money down a highway. In this case, using the ministerial arithmetic, the power truck notionally contains several billion dollars a year which householders collectively can win if they can just get their act together. The federal government’s ploy is to harass the retailers in to doing the herding of consumers towards the pots of money because, in a looming election environment, the mass market is where the voters are.

Timing is a huge political issue here. Householders/voters are still wincing from receiving the power bills for a long, hot summer. Soon they will get the energy charges for a cold winter – and next summer is not far away. The point is elections: Queenslanders and Tasmanians have to go to the polls by next May, South Australia votes on 17 March, Victoria on 24 November 2018 and New South Wales on 23 March 2019. Somewhere in this time frame Malcolm Turnbull has to pick an election date – although he may have one forced on him by circumstances. In every case, the “energy crisis” will be a major issue affecting votes.

(Just to throw fuel on the political energy fire, the next United Nations climate talks – “CoP23” in the jargon – will be held on 16 and 17 November in Bonn; you can guarantee that the ripples from this will spread in to our domestic wrangling, with the Turnbull government’s carbon abatement target sure to get a good kicking. The government’s review of climate change policies, in a number of respects no less important to the NEM than the Finkel review, is promised for “the end of 2017.” Will it appear before or after CoP23?)

The sleeper in all this is the impact of energy costs on business consumers, both very large ones (of which there are more than 3,700 across Australia) employing lots of people and hundreds of thousands of smaller ones employing a lot more. The companies are significantly impacted by what the Australian Industry Group describes as “eye-wateringly high” energy costs and the flow-on must reach workers/voters.

On Friday, GLOBAL-ROAM’s Paul McArdle, writing in his WattClarity blog in a commentary well worth reading, fretted about the “disproportionately low share of the (public) conversation” focusing on the impact of these costs on business, pointing out that last calendar year the non-residential sectors accounted for 130,000 gigawatt hours of NEM electricity consumption versus just under 60,000 GWh for households. “It’s businesses that provide our jobs, salaries and dividends from investments,” says McArdle, urging greater recognition that energy-intensive industries in particular are facing “a systemic crisis.”

Which brings us around again to the NEM and the I-word: intervention, the tool for which governments reach when the heat in the voter kitchen threatens to burn them. Market analysts, for example, describe the Andrews government in Victoria as “poised to make significant regulatory interventions in the energy market.”

The situation would be troublesome enough if it only related to price rises but the NEM waters are also muddied by political virtue-signaling through boosting green technologies and baulking fossil fuels (eg anti-fracking activity), by the very real developments in new technologies (eg storage and also solar power but also conventional supply) – which tend to get over-run by media and activist hype – and by individual corporate steps to bolster their market shares and profits.

To which can be added the issue of an ageing NEM power generation fleet (as Frydenberg points out in The Australian today, units supplying 70 per cent of NEM electricity are heading towards the end of their designed working lives). How, when and where these workhorses are replaced is a major challenge. Just how major can be illustrated by reminding ourselves of the NSW load in the critical late-afternoon heatwave hour of 10 February that so nearly saw the State, the largest sub-region of the NEM, in real supply trouble: at that point, the contributions to extreme peak capacity requirements were 64.5 per cent thermal generation, 18.3 per cent hydro power, 12.2 per cent imports from other States, mainly Queensland, 2.9 per cent all forms of solar and just under two per cent wind farms.

In passing, there are two very useful opportunities just ahead for stakeholders to assess the NEM state of play. One is a one-day symposium to be presented by the Australian Academy of Technology & Engineering in Sydney on 1 November under the title “The National Electricity Market after the Finkel review” – all the details can be found at The other is the return of the Quest Events “NEM Future Forum,” the fourth in this series, to also be held in Sydney on 30 and 31 October (see to examine key trends and technologies driving change in the east coast market and the interplay between them.

In co-chairing the latter event, I must remember to quote from Frydenberg’s op-ed today: “For government, it is not a question of preventing change, but rather of managing it in a way that ensures energy reliability and affordability remain paramount. There is no silver bullet to lowering energy prices; anybody who says so is lying.”

The great divide

Tucking in to brunch at an outdoor café in my home area, Sydney’s The Hills district, last Friday and mulling over Malcolm Turnbull’s encounter with energy retailers two days previously, I came to the conclusion that the issue of trust should be explored further in the world of the NEM.

And now, blow me, I have found a really interesting article in Britain’s Utility Week magazine on the very point, highlighting just the issues about which I was thinking in an Australian context. If you put “Utility Week” and “The challenge of trust in utilities,” you can read the whole article yourself.

This is how it kicks off: “Consumer trust and confidence in their utilities providers is far from straight forward. National headlines would have you believe that high prices and profiteering are the crux of the undeniably low public esteem in which utilities are generally held. But, in reality, the issue is considerably more nuanced, involving issues around transparency, loyalty, social equity and fair play. In short, there is no single silver bullet to the challenge of creating engaged utility customers with high levels of confidence in the industry.” Would you change a word of this in thinking about the situation locally?

The parallels run deeper: in Britain, as here, it seems there is a dichotomy between what consumer respondents to surveys say about prices and what they would like to see happen in the marketplace. Just over a third of the UK participants in a new consumer poll say they are paying a fair price for utility services and another 39 per cent say they do not believe the costs are unfair but they would like to pay less. On what I have read here over time, I’d say that’s about the Australian perspective on power costs, too. But then more than half the UK respondents believe there should be an energy price cap and 42 per cent would like to see electricity re-nationalization. Scratch our local community and would you find a very different answer?

British industry commentators interviewed by Utility Week say the magazine’s survey findings of a gulf between perceived value for money and a desire for market intervention reflect the complexity of the public trust challenge for utilities – and fears about future higher prices. Their power sector, on the other hand, chooses to see it as a reflection of a consumer desire for a more clear picture of what makes up the bill: greater visibility about costs. A leading energy analyst with consultants EY says the British answers reveal uneasiness about foreign ownership of utilities or simply a belief that a nationalized industry would provide an easier to understand system with greater standardisation of offerings – and therefore greater equity for all customers. “But fundamentally,” he adds, ”many (believe) essential services such as energy should be supplied by not-for-profit organisations.”

My own take on the local situation is wider: I think the failure of trust here is much broader.

Who among electricity and gas suppliers any longer trusts governments to maintain durable policy positions? The Grattan Institute has pointed to “an acute danger of politicians panicking and rushing to decisions that push electricity prices higher and make it harder to reduce Australia’s emissions.” It talks with good reason of “a decade of toxic political debates, mixed messages and policy backflips that have prevented the emergence of credible climate change policy.”

Trust in the energy reforms launched in the 1990s is eroding. As Energy Consumers Australia puts it to the Australian Competition & Consumer Commission (currently inquiring in to retail power pricing): “A strong case can be made that electricity market reform – the privatization of electricity and gas network and retail businesses, structural separation, retail contestability and the removal of price regulation – has contributed towards a more efficient market. The evidence is less clear that these efficiencies have resulted in lower prices or better service outcomes for consumers.” With politicians at State, ACT and federal level continuing to intervene in power supply, who trusts in the future of a genuine competitive market?

The Turnbull government’s embracing of a mechanism to enable it to interfere in LNG exports if it deems there will be a domestic supply problem in 2018 reveals (to quote a leading media commentator) a collapse of trust between the administration and gas producers.

Investors (unless piggy-backing on subsidies) are voting with their feet with respect to both new generation development and petroleum exploration.

Outside parts of Queensland, how much community trust (especially among farmers) exists for onshore petroleum explorers?

Who trusts modelling outcomes promoting energy technology directions bought from consultants by entities with vested interests?

Who trusts the bulk of the media to deliver balanced news about energy issues set in the real context of economic, technical and environmental challenges?

There is a new Essential Report poll that shows just 17 per cent of respondents rate the performance of the Turnbull government on ensuring reliable and affordable energy as “good” and 51 per cent say it is “poor” with 27 per cent opting for “average.” How far does this reflect an understanding of the complex energy issues and how far a lack of trust in the body politic generally to resolve the “energy crisis”? How many east coast Australians have an understanding of the role of all jurisdictions in pursuing a way out of the current mess?

In this environment, it seems to me that trust is the key to a safe exit from the “energy crisis” but it is well and truly misplaced; every passing day now sees it kicked further under the energy market furniture. And, as the British report indicates, Australia is not alone in this unhappy situation.

Watch these spaces

For those of us who closely follow developments in the energy crisis saga there are now a number of dates to mark on our calendars for the last third of the year.

The first is 18 August when the major energy retailers, the Australian Energy Council and others are summoned back to Canberra for act two of the somewhat theatrical “power to the people” drama being played out by the Prime Minister. (He surely must have been pleased with the photograph doing the media rounds last week showing him, fists clenched, teeth bared, delivering an opening salvo to the suppliers.)

The second is 1 September – which is when, Malcolm Turnbull tells the media, he expects the Australian Energy Market Operator to report on the dispatchable power needs of the NEM. With a hot summer looming, this is no small matter.

The third is 27 September when the Australian Competition & Consumer Commission is required to report to the Treasurer on the initial findings of its review of retail electricity prices.

Not to be lost to view in all this is the review of electricity and gas retail markets in Victoria, released by the Andrew government this weekend. The core claim of this review is that around 30 per cent of the power bill for the average State household (using 4,000 kilowatt hours a year) before GST lies in retail charges, bigger than the costs of producing or distributing electricity.

The review panel, chaired by former Deputy Premier John Thwaites, recommends introduction of a “basic service offer” via regulation for households who “want affordable energy without fuss.”

Woven in to the panel report is the suggestion that retailers appear to purposedly make the deals they offer confusing – an accusation that crops up in other parts of the “energy crisis” debate, too, and one that plays to today’s Australian community bent for viewing many large companies across the economy through a glass darkly.

There’s a paragraph from the 80-page report that I wouldn’t be surprised to see get greater, wider currency in the energy debate: “Consumers are entitled to obtain easily understandable energy offers and enter into energy contracts that provide value for money and don’t contain negative surprises.”  To which the Thwaites panel adds: “The retail energy market should deliver benefits to all consumers, not just to those who are capable, interested, and able to navigate its complexity.”

On the broader front, a possible major development is pending around 1 October – when the federal government is committed to making a decision about whether to act for 2018 under the “domestic gas security mechanism” that now allows it to limit LNG exports drawing from the domestic gas market.

The upstream petroleum industry is continuing to rattle Turnbull’s bars on export restrictions. In the latest foray by the Australian Petroleum Production & Exploration Association, CEO Malcolm Roberts has hit back at the PM for “scapegoating” Queensland LNG exports for east coast market shortages.  East coast supply is tight, Roberts acknowledges.  “However, the industry has tripled gas production on the east coast over the past five years.  More supply would have been developed if New South Wales and Victoria had not imposed bans and other restrictions on new projects.”

Turnbull, he says, should encourage these States to follow Queensland’s gas development example “not undermine it,” adding that “the east coast market needs a massive capital injection to arrest falling production in traditional basins and to realise the potential of coal seam gas as a new, large source of supply” and declaring the export controls being proposed will jeopardize this future investment.

Another date for the calendar is 9 October when Environment & Energy Minister Josh Frydenberg will deliver a keynote address to the “national energy summit” being presented by the Australian Financial Review, followed within the hour by an address to the same forum by Labor leader Bill Shorten. South Australian Premier Jay Weatherill and ACCC chairman Rod Sims are also on the program.

Potentially of rather more importance is the October publication by the Australian Energy Market Commission of design options for a clean energy target, activity commissioned by the Queensland, Victorian, South Australian and ACT governments in an effort to push the Turnbull government on adoption of the fiftieth step recommended in the Finkel report.

The mainstream energy production and retail sector, via the Australian Energy Council, is not letting up in lobbying the Turnbull government on a CET. The measure, declares CEO Matthew Warren, is the “key reform to drive new investment and bring down electricity prices.”

Given internal Coalition politics, this issue poses a large challenge for government MPs on the House of Representatives standing committee on environment and energy, which has been engaged since February in considering “the future of the electricity grid” and should deliver its report in the year’s last quarter.

Frydenberg also has to organize the thirteenth CoAG Energy Council meeting, for which there is no public date at present, and at which the CET issue is going to be no small agenda item.

Finally, something I see as a sleeper in this cost debate is the impact of the GST on household electricity prices.  I raised this in passing in one of my blog posts earlier but got comprehensively ignored. Now a senator, David Leyonhjelm, has pounced on it in a tabloid newspaper op-ed. Electricity is as much an essential service as water supply, he declaims, so why is it wearing the GST when our water does not? Removing the GST on power purchases, he argues, will provide an immediate 10 per cent cut in household bills.

Leyonhjelm claims that, across the country, removal of the GST will save households $2 billion a year, half of it in Victoria and New South Wales. He says he will campaign on the issue at the next federal election if Turnbull and Treasurer Scott Morrison don’t take up his proposal.

Just one more space to watch.

The complexity of it all

Complexity is never popular in public debate, not with demagogues who just want to slam home their big scary messages and not with more reasonable people who just want a simple answer to what they think is a simple question.  Pauline Hanson’s “please explain” of yesteryear echoes a cry from the heart of ordinary Australia with respect to a whole bunch of issues where there are many shades of grey. This is very much the case with the supply and cost of electricity, now so troubling Australians that the Prime Minister is struggling to surf the waves of a political storm about it.

I coined the acronym “MEGO” during my almost quarter century as a lobbyist for energy investors and suppliers. It stands for “my eyes glaze over” and was borne out of experiencing that effect in a myriad of federal and State MPs and ministers when confronted with an industry explanation of some issue or the other. I recall a senior minister in a federal government practically snarling at me years ago “Orchison, is there any part of your damned industry that isn’t complicated?” (He didn’t say “damned.”) My reply was “No, minister.”

The stabbing point politically in the current energy debate – for both suppliers and politicians – is the assertion that Australians are now paying the world’s highest prices for electricity, about which I wrote here yesterday, seeking to demonstrate that, when you consider where most of us live (ie Victoria, New South Wales and Queensland), this is not correct.

I was reminded in an ensuing tweet by the Energy Networks Australia CEO, John Bradley, that negation of this claim could also be found in a recent Australian Energy Regulator report. And, if you go on the Web to the “State of the Energy Market” annual report of the AER, published in May, you will find a very different picture at page 136 in the form of a comparative bar chart from the one being touted about the media in recent days.

In this diagram, where prices are cast in US cents per kilowatt hour and interpreted on a purchasing power parity basis rather than the currency exchange rates, the ladder of average residential prices for 2015 (which is the most recent year for official global figures) has Australia at 24th and Portugal, Germany, Poland, Italy, Latvia, Turkey, the Slovak Republic, Denmark, Greece and Spain occupying the top 10 places. This chart shows Australia being marginally more expensive than the OECD as a whole and a fair bit less expensive than the UK although a lot more costly than the US and Canada. Even allowing for the latest round of local power price rises (not an area where we are Robinson Crusoe), the picture won’t have changed a great deal.

Now purchasing power calculations – which adjust for differences in nations’ costs of living – are positively despized by some economists and embraced by others. Not being a member of this breed, I can’t take sides – except to point out that our energy regulator sees it as a valid comparator.

I also recall a discussion on the price issue on The Conversation late last year when a federal MP, Craig Kelly, was slamming local suppliers for (he said) charging twice what Americans paid for power. The point was made in response that a higher price doesn’t necessarily mean a higher cost to consumers. Australians, for example, on average use much less energy than Americans – the most recent numbers are 10,800 kilowatt hours annually for a US household versus around 6,000 kWh here.

One of the factors this introduces is that network costs to homes are fixed, so the more energy used, the more the connection charges are diluted in the final bill, lowering the cost per kilowatt hour (which is the basis for the latest shouting about how high our charges are). Did I mention this is all pretty complex?

Then again, the higher prices are, the more likely a country’s consumers are to pursue efficient use of energy. Japan, for example, has high prices — it ranks 16th on the AER ladder — but also has high efficiency and consequently the Japanese spend about the same on energy (in GDP terms) as the Americans.

Australia’s residential energy efficiency performance is comparatively poor and this plays in to the costs we bear for electricity use.

Another issue is the inability of about half of our mass market accountholders to burrow through the maze of energy retailer contract offers to find the cheapest deal that suits their needs (and that last bit is really important). When the current noise subsides, this may turn out to be where the most relief for householders (aka voters) may be gained most quickly. Rod Sims, chair of the Australian Competition & Consumer Commission, which is running a pricing inquiry at present, has promised to “look closely at retailer behavior and offers to see if there are ways to help people find much cheaper plans.”

I suspect there may be more urgency to this focus following this week’s talks between retailers, the Prime Minister, the Treasurer, Scott Morrison, and the Energy Minister, Josh Frydenberg.

Power business complexity, however, is going to be always with us. Just read the AER’s 162-page “State of the Energy Market” report.

In eye of the beholder

Every galah in the petshop and lots of the media are squawking at the moment that Australians “have the highest electricity prices in the world.” Is this actually so?

Well, no, if you look at the bar chart comparing the NEM States with a raft of selected countries just published in the Australian Financial Review.

The paper’s story asserts that “Australian residential customers are paying the highest electricity prices in the world,” a claim echoed through the media and in community conversation. What the chart shows about prices (including taxes), apart from South Australia sitting right at the top, is that the world’s most expensive countries are Denmark, Germany and Italy. Their costs per kilowatt hour are, respectively, 44.78, 43.29 and 40.30 cents. (The SA figure causing all the fuss is 47.13c.)

Where by far the bulk of Australian electricity accountholders are to be found is in New South Wales, Victoria and Queensland.

In round terms, these three States have 7.4 million of this country’s 9.5 million residential power customers. South Australia has three-quarters of a million such accounts. So, in the three States with 77.9 per cent of the residential account population (and of consumption), the average prices (on the newspaper bar chart, which is sourced using US Energy Information Administration data) are 39.1c (NSW), 35.69c (Queensland) and 34.66c (Victoria).

The games one can play with stats are on full display in this presentation: the US is at the absolute bottom of the ladder with 15.75c but even the meanest budgie in the petshop should know that there is a wide disparity between American state charges; its most expensive ones are well up the high price end. The chart also gives a European Union average of 29.85c and again (as illustrated in the presentation) this is a number diluted by the cheaper ones with seven countries right at the top end.

The simple point to draw is that, despite the pejorative catchcry of “world’s most expensive” now resounding through our corridors of parliament and in the media, it is untrue for the vast bulk of consumers here.  South Australia, source of the claim, accounts for 7.8 per cent of residential properties and 6.9 per cent of household consumption.

(In passing, I can’t resist pointing out that the two most expensive nations on the chart – Denmark and Germany – are countries most presented to us as icons of how to go green while among the cheapest are strong coal-burning Poland, heavily hydro Norway and dominantly nuclear France. In the ever-so-cheap US, the bulk of power is provided by gas and coal – nearly 70 per cent of it – with nuclear and very large hydro developments playing a strong supporting role. The UK, for which an average household price of 31.3 cents is cited, sources 41 per cent of its power from gas, 21 per cent from domestic nuclear and another six per cent nuclear imported from France. South Australia, the State causing us to wear the “most expensive” opprobrium, is of course another green icon.)

Nonetheless, our own price pony has well and truly bolted with the Prime Minister now summoning the large suppliers and their lobbying representative, the Australian Energy Council, to Canberra for yet another “summit” meeting in the week ahead. Symbolic yet again of how politics and populist media ranting get ahead of a proper analysis of situations, Malcolm Turnbull can no longer wait for the Australian Competition & Consumer Commission to report on the pricing issue – even though its preliminary diagnosis is scheduled to be with him on 27 September. The government, it is being reported, is “leaving open the option of (more) regulation.”

This is a repeat of Turnbull’s rush to interfere ahead of the arrival of the Finkel report because of the upheaval within Coalition ranks (and the ensuing media feeding frenzy) over an emissions intensity scheme.

None of this is to bely the fact that electricity prices in Australia are now uncomfortably high for many consumers, although, as I have pointed out numerous times, the worst danger lies in the impact on our manufacturing sector with its real threat to the economy and jobs. But rushing in with more political Bandaid is not a solution, just as interference with LNG exports does not resolve the domestic gas supply issue.

With respect to the industrial problem, it is worth pointing out, too, that the chart published by the Financial Review contains no comparisons with Asian prices – and it is in Asia that the competition lies for our beleaguered manufacturers.

Apparently, in calling the meeting, Turnbull has written to the suppliers that “the situation must be addressed urgently and directly” to “ensure no family pays any more for electricity than it needs to do.”

Getting its retaliation in early, the Australian Energy Council pushed out a statement in response on Friday.  CEO Matthew Warren says: “We agree that energy prices are unsustainable (but) we cannot fix this problem simply by talking about retail bills and customer deals. The price of electricity has increased because it is becoming scarce.  It is the market signalling the need for new firm generation capacity to be built.  The situation is already critical in Victoria and South Australia.”

Heavy industry may be unhappy about the Finkel report (see my previous post), but the AEC and its 21 members (generators and retailers) is adamant “Finkel has offered a blueprint that is the essential element to overcome our current energy crisis. A bi-partisan, national clean energy target remains the key reform to drive new investment and bring down electricity prices,”

Warren adds: “Recent power price increases are the result of old generators closing and the lack of a consistent plan as to how to replace them.  This is a national policy failure that has been a decade in the making. Investors cannot finance replacement generation capacity until they can see a workable, durable and bipartisan policy framework for the sector.”

He has told Fairfax media that “talking about retail bills and customer deals at next week’s power talks will not solve the problem of unsustainable bills.”