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 www.atse.org.au. 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 www.questevents.com.au) 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.”

Where do we want to be?

Glencore is a big player on Australia’s energy scene – not just as a significant miner and exporter of coal but as a user through its metals, minerals and agricultural activities; it spends around $400 million a year on electricity, consuming 3,207 gigawatt hours.

Its senior executive Peter Freyberg, head of its global coal assets, could point to plenty of local skin in the game when he spoke to an Australian British Chamber of Commerce lunch in Sydney today.

The talk’s peg was the future of coal nationally and internationally, but it was what Freyberg had to say about the recently-delivered Finkel report that attracted my attention.

The review, he said, sets out one possible pathway for the NEM, “but it does very little to provide investors with any confidence for future investment” – and he posed a set of “unanswered questions” in terms of the report’s modeling and analysis.

For a start, he asked, what is the assumed make-up and nature of Australia’s industrial base and “just as importantly, what are the policy recommendations around future energy affordability?”

Where do we want to be, he went on, declaring two of the “clear priorities” for the NEM should be addressing the current energy crisis and “putting Australia on a sustainable and least-cost pathway to reduce emissions without sacrificing economic growth and (our) standard of living.”

From a Glencore perspective, two market priorities have to be (a) supporting baseload power generation and (b) replacing the RET and State-based renewables targets.

“I want to be clear on one point,” Fryberg told the large ABCC audience. “Renewable energy has a role to play in Australia’s energy mix – but not at any cost and not at the expense of grid stability and reliability.”

Other market priorities, Freyberg added, need to be establishing dispatch protocols for variable renewables, differentiating between household and heavy industry users and “imposing heavy penalties on generators guilty of uncompetitive behavior.”

If heavy industry is to continue operating here, he said, the energy cost burden it is now bearing has to be alleviated.

Freyberg is calling for more work to be undertake to test the impacts of the Finkel-proposed clean energy target on Australia’s industrial base, particularly on energy-intensive, heavy industrial processing plants.

Controversially, he told the forum “if Australia needs to consider a possible delay in meetings its emission reduction targets under the Paris agreement in order to prioritize energy security and economic prosperity, then it is worthy of further discussion.”

He declared “we tell it as we see it.” Glencore, he said, has a stake in future energy policy reform here and “we are willing to talk to and work with all sides of politics.”

There should be, he added, “a formal business dialogue similar to the CoAG model” as part of plotting a “measured” path forward to secure, reliable and affordable energy while delivering carbon abatement.

The present debate, Freyberg said, is “divisive, massively misinformed and more focused on declaring heroes, victims and villains than actually solving any problem.”

More generally, he said, “policy paralysis on energy, carbon, economic reform and workplace relations reform coupled with increasing costs and regulatory red tape have seriously eroded investor confidence in this country.”

A decade of poorly designed and uncoordinated energy policy in Australia has lead to the energy crisis, he argued. “Failure to adequately plan for and replace baseload capacity combined with changing climate change policies and increasingly disproportionate subsidies for renewable energy has weakened grid stability and increased volatility and costs in the energy market.

“Despite Australia being the world’s largest exporter of coal, the second-largest exporter of gas and a major exporter of uranium, at home electricity costs have been skyrocketing and we have major gas supply challenges. For many households, the current increasing cost of electricity is unsustainable. For business it is the same and, if we don’t find solutions fast, Australian businesses, job numbers and living standards will fall.”

The public debate, Freyberg said, “tends to go straight to how to reduce both emissions and electricity prices — but there’s a fundamental step before that: ensuring the long term stability and security of the energy market.”

If this isn’t done first, he told the lunch, “we won’t have to worry about reducing emissions because the industrial base of the economy will be in terminal decline.”

And he accused both federal and State governments of not only being the font of “ongoing political uncertainty” about energy policy options but also of failing to inform the community of the costs and benefits of the choices with which we are confronted. It is irresponsible of State governments, he said, to announce emission reduction and renewables targets “without first disclosing the true costs and impacts” on households and industry.

“We urge policymakers to be honest about policy costs and to carefully consider the consequences of all available options because the flow-on impact on future investment is very real.”

In particular, he said, there is a need to differentiate between mining and energy intensive heavy industry assets such as smelters and refineries which operate 24 hours a day, 365 days a year and rely on affordable, secure and reliable electricity.

“A number of heavy industry players, including our own copper processing business, have been clear about the need to consider their future in Australia in light of the current high energy prices and uncertainty around future supply,” adding that “unless something happens quickly” such businesses will shut.

In answer to an audience question, he said “if there has to be something ultimately that gives, let’s get energy and affordability right and then work emissions reductions in to this in an orderly way.”

Risky business

The Australian Competition & Consumer Commission chairman, Rod Sims, opening a regulators’ conference in Brisbane this week, spoke at length (unsurprisingly) about electricity issues and, in particular, about affordability. (His talk is on the ACCC website and well worth reading.) What I find interesting, and somewhat surprising, is that not one of the 1,013 words he used on the electricity aspect was “risk.”

One of the (many) problems with public debating of this issue is the lack of appreciation of the risks involved along the supply chain. This doesn’t apply to Sims, who understands energy risks as well as anyone in the country. What attracts my attention is that he didn’t choose to canvass the point even in passing this week.  It will be interesting to see how he and his ACCC team tackle this issue when they deliver their preliminary report on power bills to federal Treasurer Scott Morrison late in September.

Meanwhile, the 339-page Australian Energy Market Commission report on retail energy competition published this week contains quite a lot on the topic (and certainly much more than I can canvass in a blog post).

One of the aspects lost on the media (and quite a few others) in lashing out at energy retailers is the danger of crippling costs the sellers run as they juggle their way through the east coast market.

As an example, here is an excerpt from the AEMC report: “Energy retailers face a range of financial risks. The scale of this risk means that a retailer, if improperly hedged, could become insolvent within hours.”

It explains: “Spot prices can rise from average levels around $60 to $100 per megawatt hour in one trading interval to the market price cap of $14,200 per MWh in the next interval. If a customer withdraws energy when the price is high, the retailer must pay for the energy at the prevailing spot price.

“A retailer supplying a customer load of 1,000 megawatts at the market price cap could incur costs of up to $14 million in a single hour. At the same time, the retailer might only receive $250,000 (25 c/KWh × 1000 MW × 1 hour) from its customers under their retail supply contracts. The retailer must bear the difference of $13.75 million, whilst continuing to be able to pay network businesses the relevant network charges.”

AEMC adds: “To manage, retailers require large proportions of financial capital, as well as potentially some physical capital. As such, a retailer needs to make a margin commensurate with the costs associated with the provision of this financial and physical capital.

“Some commentators have suggested that the net margins of energy retailers can be compared with (those) of other retail businesses such as supermarkets. Energy retailing is fundamentally different to food retailing; energy retailing relates to the selling of financial products whereas food retailing relates to the sale of physical products. The gross and net margins of energy retailers reflect compensation for incurring risks that are fundamentally different from the risks associated with food retailing.

“Energy retailers’ risks are more similar to those of banks or financial institutions. Therefore, to the extent that comparisons are to be made, energy retailers’ margins are better compared against those of banks or financial institutions.”

As the report illustrates, there are a multitude of issues with which the retailers have to contend on a continuous basis. For example, “the (wholesale electricity) market price in each (bidding) period is set by the price bid by the marginal generator (and) there is no guarantee that this price will fully recover all the costs associated with generation, including the return on and of capital required by each generator, in each and every period.

“The entry of wind and solar generators into the market, with their low short-run marginal costs, can reduce prices in the wholesale electricity market when there is excess supply of generation capacity. During this time, market prices might be less than that needed to fully recover all the costs of those generators that have higher short-run marginal costs than wind and solar.”

And so on. All this is lost to view in tabloid media screeching (whether in newspapers or on radio or TV) about “gouging” and other sins.

In a time of soaring power prices, it is entirely understandable that sellers of electricity should be asked to account for the make-up of the bills they despatch – and I think their explanations fall short of the “pub test” of comprehension quite a lot of the time – but to assume they are guilty of rorting etcetera without knowledge of the market issues they have to manage is another example of community energy illiteracy, which is fuelled by what politicians (and others on the make) have to say in the media.

All this is tossed together with the separate, but related, issue of energy poverty, which was a problem a decade ago when bills were half the level they are today. It does not diminish the pain those in financial difficulty are suffering to point out that they are a tiny minority of the mass market but this does not suit the rant du jour, so the travail of the few becomes a symbol of all that is perceived to be wrong with the system.

The larger issue (in terms of how energy prices bite politicians) is the big number of so-called middle class Australians struggling to deal with rents or mortgages and the other routine costs of family life. In their world, where the need to cut money corners intrudes increasingly on living the good life, yet another power bill rise (let alone the one they incurred recently from seeking to be comfortable in a torrid summer) is quite a large psychological irritant (even if the actual latest increase is only the equivalent of a cup of café coffee a week).

Another issue for this substantial cohort of the community is participation in the retail market and the problems encountered in wrestling with the process. As the AEMC points out, “in NEM jurisdictions where consumers have an active choice of retailer, 47 per cent of residential and 54 per cent of small business (customers) have not switched retailer or plan in the past five years.”  It would be fascinating to have someone calculate what this represents in aggregate savings foregone – billions of dollars is my guess.

Sims, I note from his talk, wants to focus on the level of the standing or default prices these consumers choose to pay (‘which for a range of reasons are not being competed away”). Retailer risk surely is one ingredient.

That the present situation dissatisfies the mass market, and that Australians want action to ameliorate both the actual prices we are now paying and the upward trend we fear will continue, is beyond argument. But we will not get real solutions – that is, ones that work for us over time in delivering affordable, reliable power while continuing to reduce carbon emissions – out of an environment where policymakers are in a funk brought on to an extent by confected outrage over prices and their own lack of adequate appreciation of a complex marketplace.

Getting a real public handle on the nature of risk in the NEM would be a good thing.

Two-speed market

Timely is the word for the newest energy report, published today – the Australian Energy Market Commission’s annual review of the state of retail competition across the east coast.

And AEMC chairman John Pierce sums up the market problem in one more (hybrid) word: two-speed.

“We are seeing a two-speed market,” he says. “While competition is driving innovation and new choices for consumers in the retail market, these benefits are under threat by a wholesale market with rising costs. It’s critical that future policy on emissions reduction facilitates commercial investment in generation in the right place at the right time and supports a liquid forward contracts market so retailers can effectively manage their risk and keep prices as low as possible for consumers.”

The review finds that, while NEM retail competition is stronger and delivering benefits for consumers, higher wholesale costs are driving up retail prices. “This,” says Pierce, “is putting these benefits at risk.”

Rising wholesale energy market costs are being driven by a range of factors, the report comments, including the increasing costs of hedging contracts.

“Fewer generators can provide hedging contracts due to the lack of an emissions reduction policy that is properly integrated with the energy market, while generator retirements are reducing the supply of contracts. This, along with higher gas prices, is increasing the costs of doing business for electricity retailers, especially smaller retailers with innovative offerings. The risk of these electricity retailers leaving the market is growing.”

I don’t think anyone can accuse me of being naïve about our politics – I can point to a 40-year career of close working contact with politicians, federal and State – but, the situation being as the AEMC describes it, I find it amazing that our leaders, Malcolm Turnbull and Bill Shorten, can talk this week about getting together to discuss four-year terms for federal MPs while continuing to play wedge politics with something that literally affects the lives (and livelihoods) of every Australian.

A “summit” meeting of the leaders to resolve a mess that has been a decade in the making at the hands of both sides is beyond their wit and wisdom – is that what we are to take from the current situation?

Political writers of all stripes are telling us that the state of energy prices is now so troublesome for the community that the future of the current Coalition government may hang on it at the next poll.

The reason why is clearly set out in the AEMC report: “There is currently increasing upward pressure on retail energy prices. This is largely driven by factors outside the retail energy sector.

“In recent years, retail pricing outcomes have become increasingly dependent on outcomes in the wholesale energy market. The AEMC’s price trends reports show that nationally for electricity, the wholesale component’s share of residential prices increased from an estimated 19.6 per cent in 2014-15 to an estimated 28.6 per cent in 2016-17.

“The increases in electricity wholesale costs have been due to a combination of (a) generator retirement, combined with increases in gas prices and (b) the distortionary impact of having an emissions reduction policy mechanism not properly integrated with energy policy, in the form of the large scale renewable energy target.”

The reports adds this: “Since the announcement of the retirement of Hazelwood there have been large increases in forward contract prices for electricity across the NEM. This has been due to the expectation that electricity supplied by Hazelwood is replaced by more expensive black coal and mid-merit gas generation in New South Wales and Queensland. The cost of gas-fired power generation has recently been affected by higher gas prices and concerns about the availability of future gas supply.”

And, critically, this: “The RET has resulted in an increasing penetration of renewable energy generation in the wholesale market. Due to (its design), the new generators do not have the same incentives to enter into firm capacity hedge contracts as a means for financing their investment. They can instead finance investment through the separate source of revenue derived from generating certificates.

“The result is that the new generation adds to the physical capacity in the system, but, due to the design of the RET scheme, results in no corresponding increase in the supply of firm capacity hedge contracts.

“Further, the new generation incentivized by the RET contributes to the retirement of the older generation plants that were supplying the firm-capacity hedge contracts.

“Consequently, the supply of firm capacity contracts is diminished, increasing the cost of contracts, which affects retail competition.”

One of the tedious memes of past years in this debate was “death spiral,” applied to networks and fortunately now kicked in to the sidelines, but it is clear from what the AEMC is saying that the market is caught in a “pain spiral” that can’t be quickly or easily resolved but must be fixed in the interests of householders, small businesses and all forms of trade-exposed industrial activity.

The commission tells the body politic: “Any emission reduction policy that is introduced must consider the enduring effects it may have on the energy market. In particular, how it affects not only the level of investment in physical capacity, but also how that investment in generation is financed.

“Emission reduction policy mechanisms that incentivise investment in electricity generation capacity without incentivising the ongoing supply of hedge contracts risk adversely distorting wholesale and retail market outcomes. They will inadvertently lessen the emerging competition from innovative new retail energy businesses and place upward pressure on consumer prices.

“Conversely, where an emissions reduction policy is effectively integrated and aligned with the design of the NEM, it is likely to lead to a higher degree of investment certainty in the energy market and more availability of contracts. This will reduce pressure on the wholesale electricity market and result in lower retail prices for consumers.”

The report also contains this warning for those who may be taken in by the ululating from green boosters on the cure-all offered by lots more renewable power: “In the short term, the entry of low-marginal cost renewable generators incentivized by the RET can lead to a decrease in the wholesale electricity price. However, this decrease is only likely to be transitory. Lower spot prices can lead to, and have led to, the exit of thermal generators that cannot fully recover their generation costs with low wholesale prices. Once this occurs, wholesale spot prices will increase again.”

These aspects of a 339-page report encapsulate the major challenge for the Coalition and Labor at a national level – there is another, and it is highly important, resolution of our domestic gas imbroglio, but achieving this (which is unlikely in the short term) will not deliver pain relief without the issue the AEMC has set out so clearly being properly addressed.

Is pursuing the national interest as soon as possible by fixing the “two-speed” NEM really beyond our political leaders? And, to be clear, “asap” here means “now” — not by setting up more task forces and inquiries.

The other shoe

Important as the Finkel task force report is for the management of energy supply – its political implications for Malcolm Turnbull personally and for the Coalition government over the vexed target issue are growing by the day – there is a document to come that may well land with a bigger bang.

The second shoe to fall in 2017’s wild debate on energy will be a report by the Australian Competition & Consumer Commission in to NEM retail electricity supply and end-user prices, with the media just starting to focus on the submissions it is receiving.

The commission, whose chairman, Rod Sims, says Australia has “major problems” with energy affordability, must provide a preliminary report by 27 September and a final one by 30 June next year.

What the ACCC is setting out to do is clear from its issues paper, published in May: “The inquiry will look at the drivers of retail electricity prices over time, including factors at all levels of the supply chain that may affect price, and whether there are options to address price impacts on customers. The inquiry will consider what can be done to improve the experience of customers in acquiring electricity services. The inquiry will also examine the industry structure, the nature of competition, the representation of prices to customers and any other factors influencing the price of retail electricity services.”

From a political and media perspective, the biggest bang will come from the commission’s consideration (as required by Treasurer Scott Morrison) of two things (1) “the profitability of electricity retailers through time, and the extent to which profits are, or are expected to be, commensurate with risk”, and (2) “all relevant wholesale market price, cost and conduct issues.” The latter goes in part to generator behaviour, a topic on which some stakeholders have strong views.

Overall, this is seriously important stuff for the players in energy supply, the more so as the final report is scheduled to emerge at a time when a federal election is imminent (bearing in mind that it must be held between August next year and May 2019).

The issues for residential users are much publicized in the media, but mostly in forms that deliver more heat than light; it is well worth reading the 12-page submission to the ACCC inquiry from Janine Young, the New South Wales energy and water ombudsman, for a serious dissection of not just the pain some low-income consumers are feeling but also the confusion that engulfs people plunging in to attempts to find the best deals, evidenced by the fact that three out of 10 NSW accountholders are still stuck on the “standing contracts” that are costing them much more than they need to pay. This is something of the order of a million households, not a small number in political terms.

The concerns of large industrial users, on display in the business sections of the main newspapers on an almost daily basis, are illustrated by the plea of Major Energy Users Inc for the ACCC to not merely dissect the causes of higher prices (“causing the progressive destruction of the competitiveness of many parts of manufacturing”) but to come up with solutions that will drive them down.

It will also be interesting to see how far Sims and his people focus on the impact of energy prices on the agricultural sector, which has sent in a strong submission. National Irrigators Council CEO Steve Whan says the price crisis is jeopardizing Australia’s ability to provide affordable food and fibre. Most consumers do not realize that much of what they eat comes from irrigated agriculture and irrigators have seen their costs “explode,” he adds.

So far as the mass market is concerned, the supply industry promotes the view that a high level of retail competition in the NEM is leading to continuous improvement in customer service with rising innovation in products and services and will deliver “downward pressure” on prices – which is code for “they won’t be as high in the future as they would be under business as usual.”

However, the industry argument that, in the coming decade, increased innovation will give customers greater choice and control over service, product and price runs head-on in to the pressure on politicians (and governments in office) to perform a here-and-now, Houdini-like escape on behalf of small consumers from today’s situation. Collectively, the mass market (aka voters) is growling at the body politic “don’t just stand there, do something!”

That this is a high-risk environment for both energy investors and, in the longer term, consumers (when the quick fixes turn pear-shaped, as they always do) should go without saying but it won’t stop MPs’ knees jerking.

No doubt the ACCC will focus on the fact that the issues affecting prices vary from State to State (as witness the rather shrill current public row over government-owned generators in Queensland).

The five privately-owned electricity distributors in Victoria, for example, are pointing out in a joint submission to the ACCC that their charges, in inflation-adjusted terms, have actually fallen 14.3 per cent since 1995 and now account for an average 25.4 per cent of the household bills.

(The rest of the breakdown, they say, is 4.3 per cent for transmission, 23.6 per cent for wholesale electricity costs, 12.1 per cent for “policy initiatives” – such as the RET and solar PV feed-in tariffs — and 25.5 per cent for the retail component.

(Now, hold on, that adds up to 90.9 per cent. What’s missing?

(The answer, of course, is the GST…..which takes about $140 a year on average or, I estimate, about $324 million a year from Victorian residential power users. Extend this across the country and the stealthy hand of government in the household wallet adds up to some $1.4 billion for power alone.

(In this environment, should there be a GST on electricity? Now there’s a thought.)

The network five also claim that, since the Victorian industry was disaggregated and privatized, the cost of policy measures (which include the compulsory roll-out of smart meters in this State) has accounted for 51.6 per of the rise in average annual household power bills.

On the topic of networks, every time I see a media report about “gold-plating” or “gouging” by the “poles and wires” people, I feel the urge to tweet a response that a large part of the capital outlays permitted by the regulator for 2007-2012, flowing through as substantial price rises for consumers, addressed the need to replace infrastructure built in the 1960s and 1970s with a working life of 30 to 40 years. (Try getting this in to 140 characters!) Replication across the east coast of the experiences in south-east Queensland in the previous decade (a big spur for the move to spend billions on remedial works throughout the NEM) would have created wholesale political panic by long before now. This dam burst because politicians had sat on outlays for years under the old non-market system to keep down charges and were now faced with nasty consequences.

Of course, the need to address ageing infrastructure is not the whole story of today’s network prices – but simply ignoring this aspect is bizarre.

How far the ACCC can go in disentangling the whole cat’s cradle of causes for power bills being where they are today – and communicating this in terms ordinary Australians can understand – remains to be seen. It needs to do so if the remedies politicians end up adopting from its report (and from Finkel’s) are not to turn eventually in to just more nasty (and therefore publicly unpalatable) medicine over time.

Sailing stormy waters

Perhaps the most depressing thing said about energy this month is the observation by Ross Garnaut that “it may take several more electoral cycles” before our political system can achieve a consensus on policy.

It’s especially depressing because he is probably right and the shenanigans between governments in the run-up to the latest CoAG Energy Council meeting and since it underscore the problem.

Still, there is some light: the council endorsed 49 of the Finkel report’s 50 recommendations, of which possibly the most important is the formation of a national Energy Security Board.

The Australian Energy Market Operator’s chairman reportedly sees the Brisbane meeting as “the one where the energy ship turned around.” One can only hope he’s right but one needs to bear in mind that this is a ship that has turned before – and more than once.

The ESB, says the meeting communiqué, “will provide whole-of-system oversight for energy security and reliability of the NEM and be integral to improving long-term planning.” It will report to the Energy Council on a regular basis, including an annual “Health of the NEM” review in addition to advising ministers on strategic priorities. Josh Frydenberg says its role will be “critical.”

The chances of this level of endorsement of Finkel proposals did not appear all that bright on the eve of the Energy Council meeting, based on ministerial posturing in the media, but maybe the “stakeholder roundtable” they held on Thursday night with 100 representatives from consumer groups, industry bodies and concerned companies sobered the animal spirits of the politicians.

The Australian Energy Council, representing generators and retailers, took a message to the meeting that “energy prices are unsustainable and the reliability of the electricity system is deteriorating.” It would not have been alone in presenting these sentiments. AEC chief executive Matthew Warren asserts that “the time for playing politics is over (because) Australia has arrived at a tipping point for energy policy.” Regrettably, echoing Garnaut, there is no realistic chance that politicians will stop playing games – which is why the ESB concept is so important; it will be tricky (in terms of public reaction) to maintain the games if an independent umpire is delivering hard truths.

In the short term, the hardest gig in the energy arena right now falls to the Australian Energy Market Operator, which, the communiqué notes, “has put in place a comprehensive set of actions to ensure the (east coast electricity) system is ready for the coming summer” and has also contracted an independent audit of its plans to manage the NEM through the heatwave season. Frydenberg, in a newspaper op-ed, underlines the demands being made on AEMO: “Interacting closely with generators to ensure their maintenance timetables and resource stocks are appropriate for summer is (its) priority.”

A repeat of last summer’s weather is a challenge for east coast supply shorn of Hazelwood, not least in Victoria and New South Wales, home to 60 per cent of NEM power demand in 2016 and to 6.2 million residential and business electricity accountholders. A debacle here of the South Australian kind next summer is not to be countenanced economically, socially or politically and, as the communiqué makes obvious, the market operator will be front and centre in any blame game that ensues if there is an unfortunate event.

A core part of the broader challenge for the NEM is the gas imbroglio and, really, nothing has changed after Friday’s ministerial meeting.

Frydenberg sums things up like this: “COAG has been remarkably effective in agreeing to a historic set of reforms around gas pipelines and the Australian Competition and Consumer Commission is doing important work lifting the veil on gas pricing and margins in the wholesale market, but Victoria and the Northern Territory continue to lock up their abundant gas resources and prevent them from being developed.

“It’s a bit ironic,” he adds, “for Victoria to grandstand on the Clean Energy Target while ignoring a key recommendation from Finkel’s review that States drop their mindless bans on onshore gas development, accept the science and move to a case-by-case regulatory regime.”

In short, we are still mired in the potholes on a path that should be leading to the expenditure of billions of dollars to ensure adequate east coast supplies of gas out to 2030. We still have many business consumers, large, medium and small, under the price pump and high gas prices will continue to flow through to NEM wholesale electricity prices and ultimately consumer bills. The federal government’s intended intervention to force gas aimed for foreign buyers in to the east coast market is not going to bring down prices to any comfort zone for direct users of the fuel or power generators. It’s a palliative measure, not a cure.

Chemistry Australia CEO Samantha Read said this month that there is “a lack of understanding of how critical domestic gas is to job creation.” Her industry uses 10 per cent of national domestic gas supply and the present problems, with company input costs rising by hundreds of thousands, and in some cases millions, of dollars are a real danger to jobs and the economy.

This is another area where the electoral cycle is freewheeling over the real needs of the community and the economy with Victoria and NSW in particular being unable, mainly for political reasons, to introduce a satisfactory regulatory regime for gas extraction. The same is true in the Northern Territory, where gas resources are large enough to make a real difference for southern States.

Perhaps the biggest political issue looming ahead is the highly likely coincidence around this time in 2018 of more hurtful power bills arriving in millions of homes after another hot summer and the next round of retail price hikes (even if they are not at the eye-watering levels of 2017), feeding in to the run-up to the next federal election.

Paul Kelly of The Australian opined a week ago: “At stake is the (federal) government’s ability to prevent blackouts and counter spiralling price pressures on house­holds and business. If this fails, Turnbull is history at the election.” No pressure, then – and no prospect either of Labor desisting in striving to ride the opportunity to the polling booths.

Which brings us to the clean energy target, the most politically sensitive Finkel recommendation, and to the Labor NEM State governments (in Queensland, Victoria, South Australia and the ACT) banding together to request the Australian Energy Market Commission to model a design. Frydenberg labels this a stunt, which, of course, it is, but the Turnbull government has created this problem via its inability to pursue the Finkel recommendation in its own ranks.

The AEMC request is Labor’s ploy to ensure this is a political grenade that goes off later this year or in the first half of 2018. It’s a certainty that the bulk of submissions to an AEMC inquiry will promote adoption of the measure. It is also a certainty that Abbott and his acolytes will continue to rail against the measure.

Politically, it’s a gift that keeps on giving for Bill Shorten & Co with the full-throttle support of the media.

The energy ship may have turned but it is still in stormy waters and reefs lurk ahead.