The need for the 24/7 mainstream media to live in the moment means that we are now seeing a lot of color and movement politically over the carbon price, but not a great deal of sense of direction.
Assuming that the Senate passes the “clean energy future” legislation – a misnomer that I suspect will come to haunt the ALP, down there with Hawke’s notorious “no child will live in poverty” pledge – what happens thereafter?
Well, initially not much, except for the gloating of the environmentalists for a time.
The first egregious effort in this regard can be found on the ABC’s “The Drum Opinion” website in the form of a weekend commentary by green writer Ben Eltham. Its heading says it all: “Sniff this, business lobby: the ordourless whiff of defeat.”
The Gillard government will need next to move legislation through the parliament to set up its $10 billion slush fund, the Clean Energy Investment Corporation, the Greens’ price for passing the carbon regime the second time around.
This will open the way away to another loud debate about cost impacts on consumers and use of taxpayers’ funds. For energy retailers, the serious issue will be whether the beneficiaries of the CEFC subsidies will also be able to obtain RECs under the Renewable Energy Target, further depressing their value?
If they can, the perverse outcome may be that the 2020 RET goal proves almost impossible to attain as the REC prices fall again.
From a government perspective, the next big deal is to be able to go to the UN climate change conference in Durban, South Africa, and strut its stuff, imitating Rudd’s “triumph” at Bali. The fact that Durban will not deliver any more genuine developments than Copenhagen (in a sense Rudd’s Waterloo on this issue) – something that will be heavily disguised by the interested parties in December no doubt– will be glossed over.
Part of 2012 will be taken up with the first biennial review of the RET, with the Greens likely to be pushing for a higher target and large end-users, economic rationalists and others demanding that it be phased out with the introduction of emissions trading. (This isn’t going to happen, not least because Abbott has declared the Coalition’s support for the existing RET, which runs to 2030 by the way).
Early in 2012 we will see the Queensland State election, with a high likelihood of the Bligh government being defeated. The size of that defeat will matter a lot federally – personally, I am unconvinced that Bligh has performed so badly that Queenslanders will want to do to her what we in New South Wales did to Keneally, but who knows?
The federal Coalition will paint the loss as being at least partly attributable to the carbon price in a State where it is claimed to hit hardest.
A large, new distraction in the energy arena before long may be a decision by the NSW government to privatise the electricity generating sector and even the networks.
The Tamberlin report (due at the end of the October) is the first stepping stone here.
If the O’Farrell government decides on a sale, we can expect privatisation to emerge as a debating point north of the Tweed ahead of the Queensland election, too.
In both States, the large impact of the carbon regime on tax transfers and dividends from the government-owned black coal generators, thereby cutting in to funds for use in other areas, will not be allowed to pass unnoticed.
A federal government decision on a national energy efficiency scheme is a 2012 possibility – it must add more cost to householders’ bills – and a decision on demand-side participation (being considered by the Australian Energy Market Commission before its recommendations go to the CoAG energy ministers) is also in the offing.
Looming over all this is the issue of rising electricity prices.
July 2012 and July 2013 will see ongoing increases, flowing to a large extent from the existing network regulatory determinations, but there will be other factors, including the impact of green power schemes.
By 2013 the first of the new determinations (for 2014 to 2019) will be emerging from the Australian Energy Regulator, based on whatever rule changes it and its big brother, the ACCC, can push through.
The absolute certainty about this is that there will need to be many billions of dollars outlayed on new capex and further power bill increases will result.
We can expect a whole lot of hopping up and down by all concerned between now and this time next year over the network rules changes, complete with misleading media interpretations of steps to “slash” prices.
Expect someone to drag in the “perfect storm” metaphor for July 2013 when the carbon price arrives along with the next tranche of network charges (from the current determinations) and higher RET costs and so forth – at a time when you would assume that the Labor federal government is heading to an election.
I carefully did not say the Gillard government.
The likelihood of the government hanging on till 2013 is reasonable so long as no-one in their ranks dies, is arraigned by the police or spits the dummy and walks – and so long as Andrew Wilke does not ditch them over the pokies issue.
To this veteran political reporter Michaell Grattan has added in The Age newspaper this weekend the thought that a return of Kevin Rudd could see a snap election – which he could be expected to lose – and perhaps a move before mid-2013 by a victorious Coalition not to introduce the carbon regime.
(So much for the current parliamentary decisions delivering certainty for business.)
Gillard’s chances of survival as PM certainly seem flimsy.
Whatever, as my eldest grandson is now wont to say, this is all in the realm of speculation – the energy developments are more clear.
To what I have listed above, of course, you can add some move by the federal government to purchase closure of a brown coal-fired power plant or two in Victoria and South Australia, something that will have all numbers of people jumping up and down for differing reasons.
By 2013, too, there had better be some resolution of construction of a new power station in NSW or there will be a new set of horror stories about impending supply problems. Just bear in mind that $23 per tonne carbon price is not enough to underpin a substantial gas-fired baseload plant and that there are issues with ongoing coal supply and with contract prices.
We can also expect continuing ranting about coal seam gas to have reached a higher pitch in the next 12 and 24 months.
This issue brings together a somewhat odd combination of deep greens, agrarian socialists, investment xenophobes, NIMBYs who are not necessarily green and media personalities.
It will run and run.
Given that not building new coal plants means that we are heading, as Martin Ferguson has pointed out, towards gas providing about a third of generation (more than double its present level) by the decade’s end, this is not a trivial issue.
As well, a “known unknown” in all this is the decisions energy-intensive companies are going to make about investment here in the light not only of the carbon price but also issues like the dollar value, the growing intransigence of the union movement (don’t under-estimate how this is playing in board rooms overseas – we have been here before, not least under Whitlam, and the effect is real and hurtful), the difficulty and the cost of finding skilled workers and by no means least the expectation now that power prices will double between 2011 and 2017.
This will become a bit more clear over the next two years as we approach the carbon price introduction date – and every corporate decision will be the subject of fevered political and media attention.
The government will not be helped in this regard by the Business Council’s (correct) catchcry that the new laws impose “one of the highest costs of carbon on the planet.”
The European emissions permit price is down around $10 at the moment, having been at under $20 during the two years of the global financial crisis.
As a Deloitte study for the Business Council has pointed out there are significant consequences for the government’s budget if the emissions price – when trading arrives in July 2015 – is way below the value on which compensation is based.
Plenty of room for political mischief-making in this.
My Irish grandmother used to warn me 60 years ago to be careful what I wished for – I might get it!
It seems to me that Julia Gillard and her government finds themselves in that position.