Archive for June, 2012
Responding to a journalist who asked what was most likely to blow a government off course, Harold Macmillan, in retirement, sighed “Events, dear boy, events.”
We have been seeing the Macmillan effect at play domestically this past week.
On any guess, this would have been a week, in the run-up to C-day on Sunday, that saw the news focussed on the impending birth of the carbon tax.
As things have turned out, political attention has been largely consumed by the latest round of refugee drownings off northern Australian and a renewed head-butting of Labor, Coalition and Greens MPs on boats policy.
For the electricity industry, the expectation was roughly the same – a vigorous week of debate about carbon pricing – but, if not side-tracked, this has been substantially diverted at the week’s end by the release of the new generation forecasts from the Australian Energy Market Operator (AEMO).
This report has had commentators leaping out of their armchairs to cry “market game-changer.”
On Friday night, munching King Island brie and bikkies, accompanied by one of my friend John Arlidge’s Whiskey Gully cabernet sauvignon plus shiraz blends from Queensland’s Granite Belt,I have been digging through the AEMO report after two days participating in a commercial conference on energy and utilities, which included some really thoughtful presentations.
Here is my slant on what events have been delivering.
First, let’s get clear about what the AEMO stats show for consumer demand.
(The AEMO upfront numbers are for energy sent out, from which line losses have to be subtracted to identify consumption.)
If you take 2005-06 as the starting year – when the east coast consumed 191 TWh – you can quickly see (well, once you have rambled through 188 pages) that demand pushed on through the late years of the past decade to peak at alomost 198 TWh in 2008-09.
Now, yes, there has been an impact from higher domestic electricity prices and the inroads of the subsidy-fuelled solar PV rooftop arrays, but it is hardly a coincidence that, as the global financial crisis bit, so our power requirements started to fall back.
They have bottomed out, if you assume AEMO is right in its central scenario, in the financial year now ending at barely 191 TWh.
Where they go from here is the critical question.
AEMO has scenarios range from a fast global recovery to a rather slow one.
Looking out to 2015-16, AEMO suggests there is a possible spread of demand ranging from around 195 TWh to 215 TWh.
The market operator’s middle-ground scenario suggests – note I don’t and won’t say “predicts” – 205 TWh, which I point out is 3.5 per cent above the peak late last decade.
Now, with due respect to the outlyers on the east coast, can we focus on New South Wales (including the ACT), Victoria and Queensland because these areas account for roughly 86 per cent of the market.
What do we find?
Well, NSW (plus the ACT) peaked at almost 74 TWh in 2007-08 and is expected to slide to 68 TWh in the financial year we are just beginning. (Highlighting the political can of worms Premier O’Farrell inherited from the hapless previous governing regime.)
Victoria peaked at 47 TWh in 2007-08, slid to 45.5 TWh in 2011-12 and is expected to make a slight recovery in the financial year now starting to 46 TWh.
Demand kept rising in Queensland to peak at 49 TWh in 2009-10, fell back to 47.7 TWh in 2011-12 and is projected to go up again in the year now starting to 48.4 TWh. (Suggesting new Premier Newman needs to get his head around overseeing demi-prosperity rather than behaving as if he has inherited NSW government.)
Looking to beyond 2020 is probably a fool’s errand, but I do point out that, if you use 2017-18 as a horizon, which is five years away, AEMO is suggesting we could see just over 73 TWh of consumption in NSW (plus ACT), almost 60 TWh in Queensland and almost 50 TWh in Victoria.
The sleeper in Queensland is just what level of new generation capacity will be needed to power the LNG trains and new coal mines – and when.
There are some 4,000 to 5,000 MW of new capacity requirements in play here, along with a lot of transmission development, and nothing to rival it elsewhere on the east coast (except for Olympic Dam in South Australia).
In the southern States, the aluminium industry’s situation remains an open question if you look beyond the current flurry of action to get handouts ahead of the next federal election.
Could we see a situation around 2020 where demand in Queensland is treading on the heels of NSW just as this State’s consumption was doing to Victoria at the start of the past decade?
This could result in more than two-thirds of east coast power consumption being located north of the Murray by the end of the decade – in black coal and coal seam gas country.
I chuckled today when I saw a media commentator with a strong bent towards renewables list the causes of the present decline in the east coast market as “rapid growth in solar PV, greater energy efficiency, reduced economic growth and a reduction in manufacturing output” in that order.
AEMO, on the other hand, in its statement on the situation says this:
“ The main factors are as follows:
“ Changes in the economic outlook – reduced forecasts are consistent with a moderation in GDP, especially in the short term.
“ Reduced manufacturing consumption in response to the high Australian dollar, with an increase in cheaper imports expected to impact domestic manufacturing growth.
“ Significant penetration of rooftop PV systems.
“Residential and commercial responses to rising electricity costs and energy efficient measures.”
The AEMO data assert that consumption by large industrial customers, which has sunk to under 35 TWh a year on the east coast, could be expected to rise over 40 TWh by 2015-16.
One could have a long debate on this sub-thesis and I think it is worth noting that there are about 60,000 businesses in Australia serving energy-intensive manufacturers and miners.
The fate of large industrial power consumers will have a cascading effect on these supplier firms.
Who wants to be brave enough to predict how the “big polluters” – not a phrase much in favour today although Rudd, Swan and Wong could scarcely speak about carbon policy three years ago without using it – will fare down this decade?
Their business environment will undoubtedly be a big factor in where electricity requirements are going to land.
The implications of the current outlook for generation investment are interesting.
Substantial development will be needed in Queensland to meet the LNG and coal mine projects – the question here is when?
In the southern States of the east coast, the largest generation expenditure can be expected to be on wind farms, driven by the legislated requirement of the RET.
Current industry thinking points to an outlay of about $20 billion on 7,000 MW of wind farms, mostly in Victoria and NSW.
(Building them in South Australia to sell power to its eastern neighbours would require substantial transmission developments that simply aren’t on the cards right now.)
The outlay of another $3 billion on 3,000 MW of gas-fired peaking plant, most of it in the southern States, is anticipated and what will be spent on baseload, gas-fired generation may depend entirely on whether any brown coal plants are closed under carbon policies.
One of the awkward factors of the present demand situation is that the substantial east coast distribution investments, amounting to some $35 billion for the period 2009 to 2014, have been postulated on a different view of consumption.
Lower demand is likely to be translated in to higher network charges.
The power price pain phase is far from over and will continue to feed back in to consumption trends.
The bottom line here is that electricity supply environment has changed quite a lot in a short time, probably mostly because of the economic environment, but it is a tad unclear just how much further the situation will change over the rest of this decade, and especially post-2015.
Leaping to conclusions is probably best left to the Olympic competitors in London.
Events are unlikely to be done with us yet.
We are now just five sleeps from C-day, so it is not surprising that politicians and the media are all excited, but the sun will rise on Monday, 2 July in a world not that much changed from right now.
The uncertainty for energy investors about where policy and the market are going in Australia will be as high then as it is today.
The fragile state of the federal government, and in particularly of Julia Gillard, this week marking the second anniversary of her political assassination of Kevin Rudd, will not have changed.
There will be no clarity next week on when we can have an election to change this situation.
So, let’s assume for the sake of the argument that a winter of rising community discontent leads Labor to oust Gillard when the parliament returns to a thawing Canberra.
Assume that whoever is the new leader understands that he – a male successor is as near a certainty as anything in this life – needs to get quickly to the polls to make the most of a brief honeymoon period, not to win the election (defeat is as near certain as anything in political life) but to minimise the damage.
Assume that the ensuing Abbott-led government has a thumping Representatives majority and has managed somehow to achieve a Senate situation with just enough votes to effect change (this is the really hard bit).
What will we see in 2013?
In this scenario, the carbon tax as it exists now, shambling towards C-day, will be ditched before its first birthday.
This view runs counter to the prevailing mindset in the media, and therefore among a lot of business people, many of whom (but not those running major companies who have their own information streams established at some cost) rely to a remarkable extent on what they read in the papers, see on TV or hear on the radio – or at their club – for information on which sometimes they are betting the firm.
The mainstream media view right now is that it will take “until at least early 2015” to get the legislation repealed, by which time it will have been in place some 30 months and dropping it will cause too much angst as well as endless legal complications relating to compensation.
Interestingly, this appears to be a view shared by the hoi polloi: the latest Essential Report polling, which shows that the number of respondents opposing the carbon tax has risen from 48 per cent in March 2011 to 54 per cent today, finds that 40 per cent now believe it is unlikely that Abbott will repeal the measure when he wins office. Mind you, 62 per cent of those holding this view are diehard Labor supporters.
Whoever is right – whether there can be a clean fix to the issue or a messy, drawn-out one – when this is resolved, the core question will remain: how to transition Australia, and especially the electricity supply industry, in to a decarbonising era?
Some media are fixated this week on the steps some coal-fired generators have had to take to get their debt refinanced. No surprises here, really, despite the newsprint hype.
Perhaps the most interesting aspect is that the owners of Yallourn and Hazelwood in Victoria and of Millmerran and Callide C in Queensland in each case have eschewed getting entangled with the federal government for assistance under its emergency loans arrangements and have raised the necessary money from their own resources.
The point is that owners were not forced to this recourse, as has been reported, but chose this route in all probability because they feared opening the door to government interference.
On the other hand, the Hazelwood owners, GDF Suez and International Power, had no trouble getting the Australian and Asia-Pacific banks to refinance Loy Yang B.
And the biggest of the brown coal generators, Loy Yang Power, was relieved of its refinancing problem by being sold to AGL Energy.
The difference, it seems to me, is that the Loy Yang operations have a future assured across a couple of decades and thus bankable.
Even with the bothersome financing issue stitched up, mainstream generators are not happy campers at present.
The never-far-from-the-media Ross Garnaut has been out and about saying, somewhat smugly, that falling wholesale power prices plus the carbon tax could lead to closures of plants. However, this is okay apparently because “we have too much” generation capacity.
Energy Supply Association chief executive Matthew Warren sees the situation a bit differently.
He has issued a warning that the mainstream generation sector is operating under “extreme stress” at the moment, given the new tax and falling wholesale prices.
There is a danger of the fossil-fuelled operations “being paralysed until they break,” he says.
Meanwhile, a big question mark now hangs over the value of the black coal-fuelled New South Wales generators the O’Farrell government is engaged in selling.
Leave aside the pair affected by the “gen-trader” deals of basketball enthusiast Kristina Keneally. Their value was slam-dunked by her part privatisation process and, while it will be interesting to see the outcome of their sales, it is not a major money issue – unless you are a taxpayer annoyed by the less-than-satisfactory overall return.
The main game is who will buy Macquarie Generation’s parts, given that the ACCC will insist on a split-up, and what will they pay, bearing in mind the impact of the Gillard carbon tax on the asset value?
Just how many hundreds of millions – billions? – will the taxpayers of NSW see washed down the sink as the result of a whole slew of mistakes and political games, not forgetting the role of the trade unions?
I should think two government treasurers will be watching the sale outcome with much interest.
NSW’s Mike Baird because he needs as much money as possible and Wayne Swan because he will trumpet a good price for the MacGen parts as evidence his carbon tax is not an investor deterrent.
Coming back to the latest Essential Report, the political message is that, after all the federal government explanations and after the recent mailing out of “compensation”, 67 per cent of poll respondents expect energy prices to increase a lot, 53 per cent expect the same to happen to other fuel prices, 41 per cent hold this view on the impact on grocery prices and 22 per cent think it will lead to a large rise in interest rates – while 58 per cent believe it will add to unemployment.
On this basis, it is highly unlikely that the horse Gillard and Swan are riding will do a Black Caviar at the election – there’s a better bet, I think, that, with a lot of help from the carbon tax, their nag may be dead before the race starts.
Which still leaves us with the question “And then what?”
Almost a third of the world’s government leaders didn’t bother to turn up to this month’s Rio de Janeiro UN summit, among them Barack Obama, Angela Merkel and David Cameron.
Those who did attend added nothing to what their underlings had already nutted out in lengthy negotiations – which was precious little.
“I think this process is totally broken,” writes Melinda Kimble, the UN Foundation’s senior vice president, who as a US State Department negotiator helped forge the 1997 Kyoto Protocol.
In all, more than 50,000 policymakers, environmentalists and business leaders from around the world gathered in Rio for the conference to mark the 20th anniversary of the celebrated 1990s “Earth Summit”. The cost ran to tens of millions of dollars.
(As it happens, “Rio + 20” also marked the 40th anniversary of the world’s first global environmental conference – held in Stockholm and boycotted by the Soviet bloc because the organisers wouldn’t admit East Germany as a country.)
The 1992 meeting was attended by 17,000 people. It introduced the concept of sustainable development and made climate change a standing issue on the world’s agenda.
No such landmark will accrue to its successor.
A Pew Group manager who attended the latest event describes it as “a 12-ring circus.”
The politest thing commentators are now saying about the Rio +20 forum is “inconsequential” – a sad verdict on a 10-day frolic that included 130 presidents and prime ministers for its final hours.
Fittingly, the meeting’s end was heralded by a violent thunderstorm during which a handful of leaders were still delivering ceremonial addresses in a large, empty hall.
Notably, “re-affirm” is used 59 times in the 49-page communique entitled “The Future We Want.”
“Governments re-affirm the need to achieve sustainable development (but not mandating how); re-affirm commitment to strengthening international cooperation (just not right now); and re-affirm the need to achieve economic stability (with no new funding for the poorest nations).”
This is a “Washington Post” summary.
Another critic comments that the communique contains a lot of “we encourage” and “we urge” but very little “we will.”
Perhaps the lamest statement from the event came from the British deputy prime minister, Nick Clegg, who blamed China and other developing countries, that have huge reserves of coal and want to continue using fossil fuels to grow, for failing to back European plans for a green economic revolution.
And perhaps the most relevant thing announced during the summit was the fact that global carbon emissions have risen 48 percent since 1992.
In this context, the most interesting statistic around at the moment is one that, on the coverage I have read, did not seem to get a mention at Rio: the planet’s middle class population in Asia is about to overtake Europe’s and by 2030 there will be 3.2 billion more people in the middle class than today.
These stats provide all you need to know about the direction of energy demand, I suggest. They probably say all that needs to be said about the direction of emissions, too.
Rather tellingly in the present economic environment, the new Rio declaration does not canvass earlier UN summit proposals for governments of wealthy countries to provide $30bn annually from next year to developing nations.
Domestically, no further pressure on Wayne Swan’s “desperately seeking surplus” budget, then.
Julia Gillard should be asked to explain what she was doing there, given the issues requiring attention back home, but the media won’t do that.
She is hardly in a position to admit that some of her minders had thought it a good idea to wave a green flag on the eve of C-day – how could she and they have known that the refugee boats issue would blow up on her government while she was away?
So she’s now assuring the nation that an agreement to pursue sustainable development goals is “progress” even though, after 20 years of debate since the original Rio conference, there is still no meaningful plan to address global carbon emissions.
Trying, like Gillard, to be positive, the Swiss delegation notes that the Rio resolution marks the introduction of a “green economy” on the global policy agenda and identifies it as a “key tool” for living sustainably.
Gillard, the Swiss and other leaders have endorsed a “universal shift to a green economy” as a priority – defined, I kid you not, as “creating well-being and jobs without damaging ecosystems.”
Never mind that this doesn’t fit with what the International Energy Agency says will be the global energy supply situation 25 years from now – and which is not the Gillard government’s plan for 25 years from now either.
In 2035, on her own agencies’ modelling, three-quarters of Australian electricity will still come from fossil fuels.
Globally, these fuels will account for more than half of power generation with an ongoing significant contribution from nuclear – which the Gillard government will not countenance here even though it is happy to sell uranium overseas.
The fact is that nothing coming out of Rio suggests policymakers have their heads around the dimensions of the energy/environment issue beyond mouthing rhetoric.
This drew scathing criticism from Canadian Maurice Strong, a wily bureaucrat, now 82, whom I had the chance to watch in action over a number of years when he ran Ontario Hydro between UN gigs.
He was director of the original Rio summit and has been described as global environmentalism’s patron saint.
Strong apparently told a private, wind-up dinner in Rio that the statement Gillard finds so encouraging is “a weak collection of pious generalities.”
One such is an agreement to bring together companies and countries to provide modern energy by 2030 to the 1.3 billion people who currently lack it, while doubling both the proportion of the world’s supplies gained from renewables and the worldwide rate of improvement in energy efficiency.
No-one could deny the need to provide these people with energy.
Talk, however, is cheap. Talk won’t give poor people light, comfort and a medium for cooking other than twigs and cattle dung.
The UN is good at talk.
In contrast to the politicians, much-reviled big business, needing to build its societal credentials, is acting as well as talking about sustainability.
Analysts are observing this weekend that, while government negotiators spent the run-up to the Rio+20 summit “haggling over a dwindling pool of traditional aid,” the private sector is focussed on the need to scale up investment in energy to about $US1.8 trillion annually during this decade – from about $US1.25 trillion today – with more than half being spent on cleaner and accessible energy.
For example, French utility company GDF Suez, which now owns brown coal generation here, says it will invest in 50 energy projects in developing countries by 2020 and boost its own installed capacity in renewable energy by 50 percent by 2015.
The Economist in London was moved to ask at the week’s end, viewing the wreckage in Rio, whether companies can succeed where governments have failed in protecting the environment?
The Rio communique could only bring itself to say: “We acknowledge the importance of corporate sustainability reporting and encourage companies, where appropriate, especially publicly listed and large companies, to consider integrating sustainability information into their reporting cycle.”
Perhaps the last word should go to Jean-Pierre Lehmann, retiring director of a think tank dedicated to free trade and sustainable global growth, the Evian Group, who says that these big gatherings have lost credibility and purpose. ”In fact they could do more harm than good because they cost a lot and raise public cynicism without actually achieving anything.”
Seeing Peter Voser, the global CEO of Royal Dutch Shell, on ABC Television’s ‘7.30 Report” this evening reminded me that I wanted to read his contribution to the 25th world gas conference in Kuala Lumpur earlier this month.
Shell is one of a group of 5-8 companies whose thinking about energy issues has kept me informed over more than three decades’ involvement in the sector.
The company is no more infallible than any other, but it has a long tradition of thinking aloud about key issues – something I found essential reading when directly involved with the upstream petroleum industry as chief executive of its lobby group in Australia from 1980 to 1991 and which has gone on being helpful in the years since.
Voser told the Kuala Lumpur conference, which attracted more than 5,000 delegates from four dozen countries, following closely on the heels of our Australian Petroleum Production & Exploration Association 2012 conference (which had 3,008 delegates from three dozen countries), that “the natural gas revolution is the most significant energy development in decades.”
This is no minor statement and needs to be read in proper context.
It is not an attempt to dismiss oil and coal, which intent is the chief driver of so much of the noise emanating from the “clean energy future” activists, nor does it dismiss the likes of solar, wind and geothermal energy, which are all making their way up through the ranks of technologies.
But it drives home that, worldwide, what is happening with gas development is of huge significance, something you might be forgiven as a layman for missing if your information is solely the way energy stuff is reported in the Australian media.
And the “7.30 Report” focus was almost all on Voser’s views on a carbon price and our impending carbon tax, understandable I guess, but not terribly helpful in addressing the bigger energy picture that the program’s viewers never seem to have drawn to their attention.
Briefly, the producers had access to one of the world’s leading energy figures and could only use him to gaze at our political navel.
(In parenthesis, the outlook over 25 years here, just in power generation, is for east coast Australia alone to require more than a billion tonnes of black coal, about a half billion tonnes of brown coal and some 10,000 petajoules of gas to provide electricity for a population moving towards 30+ million at the end of the ‘Twenties. Even the greenest of consultants employed by Federal Treasury sees fossil fuels contributing 65 per cent of power generation around 2030 while Martin Ferguson’s Bureau of Resources & Energy Economics sees the 2030 fossil fuel contribution as nearer 80 per cent.)
Going on to the global Shell website, I found three speeches in fact that are germane to my focus: two by Voser, the other one to the highest-ranking energy forum in the world, the annual CERA conference in the US, and the third by Simon Henry, the group’s CFO, at a dinner marking the company’s 120th anniversary in Thailand.
They can all be found on the group’s media centre website.
Paraphrased, Voser’s message is this: In the past decade the petroleum industry has “perfected” the technology needed to unlock gas from places previously assumed to be out of reach. This now provides increasingly abundant and diverse supply, enhancing energy security. Worldwide, recoverable resources of gas now account for about 250 years’ consumption at current production rates.
China and Australia are singled out – beyond developments in North America – as likely to see “the next wave of the gas revolution.”
You and I know the Australian story.
Of China, Voser says: “Its potentially enormous deposits could play a major role in helping to boost the share of gas in its energy mix and to ease its dependence on coal.”
(Its coal use, of course, is the biggest single factor in greenhouse gas emissions today.)
A key part of the Voser narrative is to highlight the substantial investment and complex technology required to sustain the global gas boom.
He takes on the problem areas quite forthrightly.
Many worry that modern production techniques will harm the environment and endanger their health, he acknowledges, but he insists that the techniques are “tried and tested.”
Hydraulic fracking, for example, he says, has been performed in the US alone 1.1 million times in 60 years.
“Documented instances of freshwater contamination are rare – and they were due to poorly designed and constructed wells.”
He asserts that some of the concern is not based on facts or rational argument, “but it is our reality and these concerns need to be addressed.”
And he is firmly of the view that the industry needs to do a better job of its communications.
Shell supports transparency about chemicals used in the tight and shale gas businesses.
From an Australian standpoint, the Shell market perspective is important.
Henry points out that South-east Asia’s urban population has almost doubled in two decades and two-thirds of its population will live in cities by 2050.
Gas will be a critical part of their energy security and improved lifestyle.
“Urban dwellers,” he notes, “typically consume more energy than their rural counterparts, partly because they are wealthier. Sprawling cities have much higher levels of energy consumption.”
This is especially true in personal travel.
Henry says sprawling cities in the US have per capita energy consumption that is 5-10 times higher than in some Asian cities, of which the high density stand-out is Singapore.
(This, of course, is the story of Melbourne, Sydney and south-east Queensland, too, where public transport infrastructure is inadequate to curb energy demand.)
The Shell executive also highlights an issue that is hardly a problem here, but is a huge one in Asia: the fact that burning gas to make electricity in the urban airsheds offers a major air quality gain for large cities.
Henry’s analysis goes to the fact that, for the medium term, South-east Asia is a big, and growing, demand area for energy supply, including Australian LNG, but in the longer term it will see greater energy efficiency.
The bottom line comes from Voser: “The natural gas revolution offers the best, most promising opportunity we have today to make substantial, immediate progress towards a more sustainable energy supply” – including, he is careful to add, as a supporter for intermittent solar and wind power, too.
Between them, Voser and Henry also canvass an issue that I personally think is too far under the radar here in Australia – the conversion of gas to liquid fuels. (Something that can also be done with black and brown coal, of course.)
When our dollar value falls back, as it will do eventually, to rather less elevated heights than it scales today, there is a nasty surprise waiting for us in the cost of importing transport fuels – and perhaps also in terms of energy security for a country that seems to struggle to manage its blue water naval activities.
I thought management consultants Deloitte summed up the immediate Australian situation in a paper the firm distributed at the APPEA conference: “Eastern Australia’s gas market is currently facing an unprecedented convergence of issues that have the potential to both transform it in to one of the world’s largest LNG exporters while presenting challenges for the security of domestic gas supply.”
The Shell speeches serve in part to reinforce this thought and go further in terms of both the promise and the problems gas now presents.
The federal government is not going to buy the push for sequestration of gas resources to feed the domestic market.
After several weeks of pressure from gas users, especially manufacturers, spearheaded by Dow’s global boss, Andrew Liveris, Energy Minister Martin Ferguson gave no ground when he spoke to the annual conference of the Committee for the Economic Development of Australia in Canberra this week.
The DomGas Alliance argument, in essence, is that “Australia is the only country where international oil companies can access and export gas without prioritising domestic supply – the only major gas-producing country suffering serious shortages and sharply rising prices even as production increases.”
However, Ferguson sees things differently.
“It is my view that restricting energy exports in a bid to suppress (domestic) energy prices will provide the wrong signals to potential investors,” he told the CEDA audience.
“Artificially holding down gas prices, as a reservation policy will do, only acts as a disincentive for gas extraction and may risk shortages in the longer term.
“Adequacy of supply will suffer because investors will turn away from what will become less attractive development opportunities.
“Calls for intervention in the market only serve to dampen any appetite for the very investment needed to bring on new gas supplies.
“Reliability would diminish because investors may seek to recover costs by reducing maintenance and upgrades to maintain profitability.
“And while local energy prices may be suppressed in the short term, in the longer terms costs would eventually increase when consumers demanded improvements in adequacy and reliability.
“Fundamentally, from an economy-wide perspective, price restriction only leads to inefficient allocation of resources.”
He readily acknowledged that a key challenge on the east coast as well as in Western Australia is going to be managing the potentially tight market conditions driven by the competing demands of foreign and domestic customers – and that this may result in higher gas prices here.
Referring to the meeting of the Council of Australian Government’s energy ministerial committee in Darwin a week ago, he said governments have collectively agreed on the need for national policies to be made sufficiently flexible to meet market conditions.
Ministers agreed as well, he said, on the need for a national regulatory framework for coal seam gas developments.
Ferguson also took the opportunity of the CEDA talk to warn that optimism in the gas industry about the domestic market based on the uptake of the fuel for power generation may need to be curbed.
Gas suppliers hope to see some 10,000 petajoules of their product sold to the power industry over the next two decades as its share of electricity production effectively trebles in a carbon-constrained environment.
However, Ferguson said: “Domestically, the role of gas in Australia’s electricity system may take longer to materialise than expected.”
He pointed to the downward revision of east coast electricity demand by the Australian Energy Market Operator and its expectation that consumption will not return to growth in the next few years.
“This is suppressing wholesale electricity prices, which, roughly speaking, are (now) around half of what they were five years ago,” he said. “The flow-on effect will be to lock coal-fired electricity generation in to the market as the incentive is weakened for cleaner forms of baseload generation such as gas.”
The current government expectation, according to Ferguson, is for new investment on the east coast to focus on gas-fuelled peaking plants and wind power driven by the RET.
He attributes the change in the east coast market to (1) a greater uptake of rooftop solar power, (2) lower demand from energy-intensive industries including aluminium and steel, (3) a delayed coal seam gas start-up, (4) milder seasonable weather patterns and (5) greater than expected demand response to higher electricity prices.
In short, the federal government is offering cold comfort this mid-winter for both gas suppliers and gas users on the domestic front.
On the other hand, Ferguson remains resolutely upbeat about Australia’s prospects in the international market and keen to press for greater understanding of the benefits.
“Australia ultimately has far more to gain than to lose from global trade and investment in our energy resources,” he told the CEDA audience, pointing to the current level of capital investment of $197 billion in energy projects, with seven out of 10 of the world’s current LNG developments under construction here.
“With our small population and massive resources base,” he said, “we are one of just three net energy exporters in the OECD, with 70 per cent of our annual production going to international markets. We must do all we can to enhance Australia’s competitiveness in international markets – for the good of our own population and that of our trading partners.”
It’s too, too much!
I have enough trouble keeping up with energy developments and with politics and now the world in my other big interest, the media, is turning over.
As Fairfax Media and News Ltd gear themselves to make significant changes, the implications for the energy industry are not trivial.
In this new environment, where media Titans will go head to head even more competitively, expect still greater attention to energy issues, and especially to energy security and energy prices.
This week’s intervention in the electricity market by the News Ltd tabloids to promote bulk discounts for household and small business customers via the One Big Switch organisation, set up by former Kevin Rudd adviser Lachlan Harris, is a case in point and more than interesting.
The discount campaign, which relies on the already-established opportunity for bulk purchases and on-selling, will be managed by former “Choice” staff member Christopher Zinn.
One Big Switch will earn a commission from electricity providers for each customer taking up a supply offer.
This, I feel, is a quite a straw in the wind for both the media and for energy suppliers.
Among the toughest hurdles the industry faces is getting politicians out of the way over retail prices.
Even though the means of competition is available, State governments (other than Victoria) are running scared from cost-reflective pricing and lifting retail regulation because they fear a voter backlash.
If campaigns such as this take off – and one imagines it won’t be long before News Ltd and One Big Switch find competitors in the space – and many more consumers become comfortable with chasing the best prices, the heat won’t evaporate from the power debate – because prices will continue to rise – but politicians will be freed to ask: “Well, are you taking advantage of the discount opportunities?” as they now can with petrol.
Zinn makes an interesting point in the publicity in today’s newspapers, locally for me the “Daily Telegraph.”
He says: “People are disconnected from their electricity bills and, as prices go up, they feel powerless to do anything.
“People will drive around to find the cheapest petrol, but they don’t do that with electricity.
“What we want to do is re-connect people with their bills.”
Zinn asks why should households spend perhaps 10 per cent extra for energy when they can get the electrons with an easy discount?
An an example, let’s take The Hills area where I live in outer Sydney.
This sprawling, ever-growing bit of suburbia has one of the largest average household power demand levels in the country, partly because the plateau between the city and the Blue Mountains is prone to hot, humid summer weather and biting cold in winter, partly because access to gas for cooking and heating is not great here.
An average household in The Hills uses 10,400 kilowatt hours of power annually, for which the bill in the financial year now ending was $2,574 and in 2012-13 will be $2,878, largely because of a $242 impact of the carbon price.
(This is a third higher than the NSW residential consumption average and double what your average Victorian home consumes because that State has a much larger uptake of gas.)
One Big Switch, through the interactive information on the “Daily Telegraph” website, claims people in The Hills taking up its discount proposition can cut their bills by $317 in the new financial year.
The business is setting out to win 25,000 household and small business customers around the country “to unlock group discounts.”
The scheme will work through customers registering with a website (www.bigelectricityswitch.com.au) by 15 July.
As Zinn acknowledges, this idea has not been tried before in Australia – at least not at this level.
He and News Ltd are reckoning on public concern with power prices – which have been rising more than four times faster on the east coast than average weekly earnings in recent years – driving the project, delivering income for his firm and kudos for the tabloids, who will talk up every development.
How long do you suppose will it take for some other business and the Fairfax papers, going tabloid themselves in 2013, or a television chain to buy in to the game?
From a power supply perspective, this is a good thing, I suggest, and a still better one if it enables the industry to finally push State politicians over the line to retail deregulation.
Down this road lies the opportunity to introduce across the east coast smart meters and time-of-use charges aimed at flattening peak demand – and by extension curbing further high network charges.
I may just need to hire help so I can keep up with the speed and complexity of this shifting environment…………..
Julia Gillard’s domestic spinners will work overtime this week to gain good domestic coverage of her forays to Mexico (for the G20 meeting) and Rio de Janeiro (for the latest UN talkfest on the environment).
It is the latter – the “Rio+20” conference, marking the 20th anniversary of the meeting in the Brazilian capital that kicked off the long climate change march to Kyoto, Copenhagen and Durban – to which the spinners will be looking for positive publicity back home.
Rio is where the Prime Minister can strut her “clean energy future” stuff.
Before we get on to that, it is worth noting, I think that, at the time of the original Rio conference, global carbon dioxide emissions were estimated to be 22.7 billion tonnes annually. Today they are somewhere north of 33 billion tonnes a year and climbing.
The “glass half full” types will point out that the industrialised countries collectively are on track to meet and even beat the commitment made at Kyoto for their emissions.
However, this is largely due to the collapse of the Soviet Union and to the manufacturing slump in developed countries created by the economic crisis of the past four years.
Between 1992 and 2010 (the latest data), developing nations doubled their emissions and now account for 54 per cent of the global total.
The fact that Rio 2012 will follow Copenhagen, Cancun and Durban in achieving two-fifths of three-quarters of you-know-what in terms of developing a post-Kyoto emissions agreement is not the point so far as Team Gillard and federal Labor (or the Cash For You Party, as it is apparently now to be known).
The tenor of what the Prime Minister will be spruiking, amid applause from the large Rio audience, can be found in what her Cabinet Secretary and Parliamentary Secretary for Climate Change, Mark Dreyfus, has been out-and-about saying in recent weeks.
Australia is “putting in place policies to transform our economy and to disconnect economic growth from carbon pollution.”
The “clean energy future plan will transform Australia in to a world leader in energy efficiency and sustainability.”
The Australian government is “committed to reducing energy costs for households, to reducing market barriers for businesses and to reducing greenhouse gas emissions for the entire country.”
Read the “reduce energy costs bit” against another speech in which Dreyfus told the Committee for the Economic Development of Australia that the carbon price will “make higher-cost renewables and gas-based electricity more competitive relative to high-polluting but cheaper coal-fired electricity.”
Australians, Dreyfus last week told the Property Council (the people from whom his government whipped away the $1 billion “tax breaks for green buildings” program in the May Budget), “can be confident that we now have in place a comprehensive, coherent, evidence-based approach to reducing the risks of climate change which provides business with certainty about the future.”
(When I read something like this I am always reminded of that illustration of chutzpah as being the fellow who murdered his parents and then threw himself on the mercy of the court because he was an orphan.)
In the context of some of this weekend’s media coverage, it is interesting to note that Dreyfus made the point to CEDA that renewables-based generation would expand under the “clean energy future” program from 10 per cent of power supply today to 40 per cent in 2050.
What he did not add is that, on the government’s own modelling, 10.5 per cent of generation in 2050 would still be from conventional coal plant, 17 per cent from conventional gas plant and 25.7 per cent from coal and gas plants fitted with carbon capture and sequestration technology.
This will involve, my back-of-the-envelope calculations suggest, the burning of several billion tonnes of coal and about 25,000 to 30,000 petajoules of gas over the next 38 years.
The government’s target of cutting 2050 emissions by 80 per cent from where they would be without abatement measures is critically dependent on CCS being commercially available – and the advice it is getting from its modellers and agencies is that this will not be the case, under present policies, before 2030-35.
This is what makes Lenore Taylor’s article “The burning questions that won’t go away” in this weekend’s edition of the “Sydney Morning Herald” such interesting reading.
Taylor reminds us that Gillard’s predecessor, Kevin Rudd, promised to “lead the world” in the development of CCS, but most of the $1.7 billion allocated to promoting the technology in Australia remains unspent.
She reports that Dick Wells, chairman of the government’s expert advisory committee on the technology, wrote to Gillard last year to warn that pursuit of CCS here would fail without a policy to bridge the gap between the $23 per tonne carbon price and the $80 per tonne support it actually needs to achieve traction in our energy market.
CCS, of course, is specifically excluded from support by the new Clean Energy Finance Corporation Team Gillard is currently taking through Federal Parliament because the Greens hate the technology and it being snubbed was part of their price for supporting the carbon tax bills.
Christine Milne says the dichotomy between what is actually happening and the government’s “clean energy future” projections for 2050 is Gillard’s problem.
“It’s all about legitimising ongoing coal mining and expansion of coal exports,” declaims Milne in the “Herald” interview. “Carbon capture and storage is a figleaf for the government.”
She describes a policy of aiming to reduce greenhouse gas emissions and also maintaining coal exports (worth $44 billion in trade earnings this year, helping to cover an import bill for transport fuels of about $15 billion annually, heading towards $30 billion later this decade) as “a complete obscenity.”
Dreyfus has been telling audiences that the “clean energy future” policy will drive investment to “retool Australia’s economy to help ensure national prosperity in a low-pollution world.”
As late as 3 May he was talking about the impact of the carbon tax on “500 of our largest polluters” – although it now appears that the government has been able to identify fewer than 300 companies to be caught in the tax web – but not mentioning the importance of CCS in achieving the long-term targets.
Responding to Lenore Taylor, Climate Change Minister Greg Combet argued that the coalminers should be doing more to support CCS – the industry in fact is raising $1 billion over 10 years from 2006 to help develop the technology and has committed $289 million to support projects so far – but his attitude overlooks something important: CCS is as much an issue for gas generation as it is for coal-fired power.
The government’s own modelling out to 2050 reinforces this.
There was no mention, however, of CCS in the keynote address Resources & Energy Minister Martin Ferguson made to the APPEA conference last month.
The most recent development in the field at a local level is the $54.3 million agreement between Ferguson, New South Wales Energy Minister Chris Hartcher and the Australian Coal Association to assess geological storage opportunities for carbon dioxide in NSW.
The two governments and the association are sharing the cost.
The sum involved may not seem much, but the issue is important: NSW has the largest electricity-based emissions in the country and, to date, the least viable storage prospects, a point that will impact on future gas and enhanced coal generators as well as existing conventional coal plants.
Obviously, we need not hold our breathe waiting for Gillard to talk up CCS and the government’s support for it in Rio this week, but she can’t boast about its 2050 target there or here without explaining how she is going to facilitate achieving one of the central planks in its achievement.
I carry a tiny notebook so that I can scribble memory-joggers.
This is not only to ward off the frailties of encroaching old age, but because, like the readers of this blog, I find there are just too many things going on in the energy space to enable me to keep track of them all.
Thus on Friday night, esconced in the comfort of Government House, Sydney, a guest of that most admirable person, Professor Marie Bashir, Governor of New South Wales, I made a quick note: “Read CEFC Hansard.”
The occasion was a reception given by the Governor for the Australian Institute for International Affairs with a talk by Jillian Broadbent, who, among her numerous top jobs, is the incoming chairperson of the federal government’s Clean Energy Finance Corporation.
The note was to remind me that I had not read the House of Representatives’ debate on the CEFC-related legislation, which passed through the lower assembly at the end of May.
So today, yet another rain-soaked Saturday in what used to be known as “sunny Sydney,” I ploughed through the relevant Hansard reports.
My particular focus in doing so was on the Coalition’s perspective because I have found in recent forays in to forums involving energy company people from around the country that there is a lack of clarity, and therefore heightened concern, about its policies after the anticipated massacre of Labor at the next federal election.
That the Coalition will seek to rescind the carbon tax legislation – and the CEFC, too – is well known. It’s what else is on its agenda that tends to be a bit obscure.
One thing immediately leaps out from the Hansard reports: the Coalition has made a rock-solid commitment to continuing to support two important carbon-related targets: (1) the national abatement goal of driving emissions five per cent below 2000 levels by 2020 and (2) the 2020 renewable energy target.
This is clear from speeches in the CEFC debate from the opposition spokesman on the environment, Greg Hunt, and from the shadow Treasurer, Joe Hockey.
As Hockey put it: “Where we differ from the government (on pursuit of the abatement target) is the mechanism used. We do not believe (in) increasing taxes and increasing government debt. We certainly do not believe that a $10 billion slush fund is the solution to economic and environmental sustainability. It is economically irresponsible, fiscally irresponsible and environmentally suspect.”
While the legislation commits the CEFC to spending about half the $10 billion – to be given to it in five equal annual payments from 2013-14 – on renewable technologies and no more than 50 per cent on low-emissions technologies and energy efficiency developments, specifically excluding carbon capture and storage at the Greens’ insistence, it is clear from the House debate that the Coalition will aim its election fire on the renewables aspect.
Hunt, Hockey, finance spokesman Andrew Robb and a number of other Coalition MPs hammered the point that any renewable project funded by the CEFC will not add to the RET.
“It beggars belief,” Hunt thundered, “that any renewable energy generated as a consequence of CEFC investments will simply displace other renewable energy which would otherwise come on line between now and 2020.”
Not one watt of extra zero-emissions energy would be created, he said. “This is an extra-ordinary example of conceptual failure.”
As well, he argued, the fund will have an impact on existing projects.
“It changes the financing regimes, the competitive regimes, the merit order (and) it has a sovereign risk impact on (such) investments because, if they are displaced by subsidised projects, it has an impact on their ability to compete in the renewables space.”
Robb wanted to drive home that the CEFC is a “product of grubby politics” – of “a desperate last-minute deal, a political bribe, to win the support of the Greens for a carbon tax.”
The CEFC funds, he added, “will be invested in projects banks would not touch with a barge pole.”
It all adds up to the Coalition going to the polls with as big an attack on the “slush fund” as on the carbon tax to ensure that, after victory, it can claim a mandate to kill off the corporation.
Whether any of this agenda this can be achieved soon after the election by the Coalition gaining enough Senate seats to support the changes is something that is exercising corporate minds more and more.
Many businesses foresee a long-drawn-out process, necessitating a return to the polls in a double dissolution election, that will leave them in the shadowlands of investment uncertainty until as late as 2015.
Reading the government’s contributions in the parliamentary CEFC debate, I thought it had given little attention to rebutting the Coalition attacks – perhaps because it has the parliamentary numbers and couldn’t be bothered to do so or perhaps because it simply does not have the means to do so.
Cabinet Secretary Mark Dreyfus, who is also parliamentary secretary for Greg Combet’s portfolios, for example, argued the bills are important “because they take Australia closer to a low-carbon future.”
“They will help unlock our national potential by securing a strong and sustainable renewable energy industry.”
Establishing the CEFC, Dreyfus asserted, “means we have taken a very large step towards reducing our carbon emissions.”
This is the stuff of “Fawlty Towers” where the combination of Basil’s incompetence and hubris ensured that trouble was never very far away.
In this metaphor, the CEFC, it seems to me, resembles the tree branch Fawlty used to beat his non-performing car in one memorable skit.
Not surprisingly, the Coalition was happy to ensure that the debate included a quote from the Australia Institute, hardly a friend of its positions, pointing out that, in theory, policies such as the one introducing the CEFC should do one of two things: realise cheap abatement that won’t be picked up by the carbon price scheme or accelerate a decline in the cost of low and zero-emission technologies.
“If,” said the institute, “the policy isn’t achieving one of these two objectives, it is wasting money -–and the CEFC doesn’t seem to have been designed with (either) clearly in mind.”
What else comes out of the parliamentary debate is that the RET is safe under the Coalition, regardless of the campaigning against it by manufacturers and others in business.
(Combet, by the way, is quoted in an environmental magazine this month as conceding that the CEFC will not add to the RET and saying the government has no plan to increase the target – “although the (new) Climate Change Authority may make make recommendations along these lines” when it reviews the program later this year. The Coalition commitment, obviously, is to the existing RET.)
The other renewed commitment – to the five per cent below 2000 target by 2020 – raises significant questions about how the Opposition proposes to get there.
Nothing that it has said to date inspires confidence that it has a fully worked-through strategy waiting to be unveiled.
While the Coalition wanting to keep its powder dry until the election is politically understandable, its doing so is adding to the environment of uncertainty now shrouding energy investment.
One way and another, the body politic is constructing an energy Fawlty Towers for Australia – and it is no laughing matter.
I’m fond of including in talks I give a quote, somewhat amended, from T.S.Eliot: “Between the idea and the reality falls the shadow.”
It encapsulates, I think, the situation on smart metering in this country.
The debate and the literature is full of the prospects in the sunlit uplands of networks where customers are empowered and engaged while suppliers have a new grip on demand that starts to address costly investments.
However, only Victoria has embraced the roll-out of smart meters. Other States, as I reported in a post on this site earlier this week (see “Moonshine and meters”), are shying away from commitment any time soon.
The Victorian experience is not been an especially happy one. Someone highly respected in energy watchdog roles described it to me this week as “a debacle.” It had set back customer acceptance years.
The Baillieu government, of course, inherited the smart meters controversies – there are a number – from Steve Bracks and John Brumby.
Doing something to both sort out the Victorian hassles and to demonstrate more widely the benefits of going down this path is a job for both government and the supply industry.
Last month the State’s director of energy safety, Paul Fearon, issued a draft report in to consumer and media claims that meters in Victoria had exploded or caused fires. This was not supported by the evidence, Fearon said. “I have no hesitation in assuring Victorians that smart meters are safe.”
(More than 1.1 million meters have been installed in Victoria so far. The projected cost of the program exceeds $2 billion, rather more than the $800 million claimed by the Bracks government when it was launched.)
The other side of this coin is the community pushback against paying for something from which they are not receiving a benefit – because the costs are already appearing on their bills – and it here that the investor-owned distribution businesses in Victoria are starting to step up to the plate.
One of them, Jemena, which has so far installed 107,000 smart meters in its north-west Melbourne franchise area and is due to complete delivery of the technology to 315,000 households by the end of next year, is announcing today that it has launched a way for customers to save money by accessing information about their electricity consumption.
The company’s “Electricity Outlook” web portal will enable customers where the meters are installed to access daily data via computer, tablet or smart phone to find how much power they are using and when they are using it.
The set-up will enable them to compare their usage with past consumption as well as average demand in their neighbourhood.
They can set themselves consumption targets and measure how they are going – and they can shop around for the best retail offer that matches their usage behaviour.
The Moreland Energy Foundation, a local consumer ginger group, says the development is “an exciting step in demystifying electricity use.”
The critical element, I think, is that this, and other efforts like it being pursued by other Victorian suppliers and trialled elsewhere on the east coast, can start to demonstrate a clear value for the customer from the technology.
It begins to take us down a path, as described last month by CSIRO’s Energy Transformed Flagship in Newcastle, towards where customers won’t be asked to change their lifestyle but will have automated devices to help them manage their power consumption.
Victoria’s Department of Primary Industries provided a useful line, too, in a commentary on its website: “With growing energy demand and rising prices, there is a need to give electricity customers greater control over their consumption.”
Jemena technology manager Michael MacFarlane also puts his finger on a key point: “Everyone will learn something when they see their consumption for the first time (on the self-service web portal). Even if it is only setting a target and working out how to achieve it, this technology will change the way people think about electricity.”
He adds: “Turning off the lights when you are not in a room, understanding how much that beer fridge in the garage is costing you, discovering what appliances are still running in the middle of the night when they could be switched off or put on standby – everyone will have the opportunity to learn something.”
This sort of stuff adds up in money terms. I saw a report in the Australian Financial Review earlier this year quoting AGL Energy arguing that combining smart meters with time-of-use pricing could save customers up to $33 per megawatt hour.
Your average NSW home, for example, uses about 7 MWh a year. Consumption is a bit lower in Victoria because so many homes use Bass Strait gas, but there are more than a few south-east Queensland households, with multiple air-conditioning units and swimming pools, that consume 10 MWh a year.
Of course, we have to get to the stage where politicians pluck up enough courage to follow Victoria’s lead – and have learned from the roll-out mistakes there.
The Australian Energy Market Operator says the critical factor that will influence the success of smart meters in this country is the agreement of the jurisdictions to mandate the roll-out.
For this to happen, the community has to be persuaded that there is a net benefit to it, the cost recovery process has to be smart, too, and steps need to be taken to deal with payment problems for some customers.
AEMO is somewhat pessimistic.
It says “it is unlikely that the benefits of smart meters will be achieved in the medium term.”
However, it seems to me, that the game changes when consumers are starting to say “Why the heck are my friends or family elsewhere getting this benefit and it isn’t available to me – why is this roll-out taking so long?”
This is where Jemena’s “Electricity Outlook” program, and others like it now being started, takes on a national value – and, I think, there is a role for the federal energy portfolio to monitor the positive outcomes and trumpet them around the country while the Victorian government gets on with the job of re-assuring its voters that, despite the hassles to date, this game is worthwhile.
That’s potentially a good way out of today’s electricity shadowlands.
If you live in western Sydney, the Illawarra, the Southern Highland or the Blue Mountains, the power pain news this week was less bad than for households in the rest of the State, but it was hardly good.
The households in the Endeavour Energy (aka Integral Energy before the Keneally government sold the retail wing and the name in the “gren-trader” deals) face an 11.8 per cent rise in their bills from 1 July, the date on which the federal government’s carbon tax also makes it debut.
This area is home to quite a number of “Howard’s battlers” from yesteryear’s politics and the fate of the Gillard government depends in part on how they, and others with cost-of-living stress across the nation, react to the Greg Combet argument that they are being compensated for the burden of “leading the world” on this aspect of carbon abatement.
Combet’s own electorate is on the other side of Sydney in the Hunter Valley.
Households in it and the rest of Sydney and the Central Coast will be wearing a 20.6 per cent power bill increase from 1 July, almost half of it attributable to the carbon tax.
Rural New South Welsh, served by what used to be Country Energy, now Essential Energy, face a 19.7 per cent increase.
To all of which can be added a rise in gas prices for households ranging from nine to 15 per cent for NSW homes and small businesses, too. The size of the rise depends on both the amount of gas used and the carbon intensity of supply, which varies depending on source.
In “Greater Sydney” and Central NSW, the tax-related rise is $43 a year. It varies in rural and regional areas from as low as $29 to as high as $89.
The bottom line, using a typical Sydney home consuming 23 gigajoules of gas a year, is an $822 annual bill.
Apart from the carbon tax, the bulk of the higher electricity cost reflects another instalment of charges flowing from the State’s $35 billion outlay on distribution networks.
Here lies the rub for the federal government.
This time next year, when Julia Gillard will be on the brink of calling an election if she can survive the Ides of October, November and December and the panic in her own party, NSW will be going through another round of price rises because the impact of the Australian Energy Regulator’s super-sized capex decision rolls on until mid-2014.
Moreover, by then it will become clear what the State’s networks will be seeking from the AER in capex for the period from mid-2014 to mid-2019, which covers what almost certainly will be the second term of Coalition government in NSW. The March 2011 election landslide made sure of this.
Numbers will be flying like confetti as this debate rages on, not always in a way that serves to inform the laymen.
The O’Farrell government, for example, is pointing to a new Australian Energy Market Commission estimate that a slight adjustment in reliability standards can cut capex outlays by $2.5 billion – over 15 years.
By mid-2013, too, the NSW generators can be expected to be sold, bringing in perhaps $5 billion in revenue for a government hard-pressed to find money for infrastructure development in a State ill-served by the Labor administrations from Bob Carr to Kristina Keneally.
The current leader of the State opposition, a minister in that government, continues to gibber that the generation sales will drive up power prices and no-one in the media holds him to account to explain why this should be so.
The political shenanigans are just noise to consumers, however, none more so than for those householders who are also small business people, of whom there are many thousands in NSW.
Under the regime taking effect on 1 July, these folk, depending on where they live and work, face domestic power bill increases ranging from $208 annually to $427, if they are in rural areas, and business increases from $270 to $555 (in rural areas).
The federal government offers them compensation for the impact of the carbon tax on their home power bills but nothing for the extra business cost.
This is a story that will be repeated across the country and a veritable army of small business people, stressed by long hours and difficult trading times, are going to be looking for someone to blame for their woes.
Even where the news is less bad – as in the Endeavour Energy franchise area – politicians will find ways to muddy the lily.
The federal opposition spokesman on the environment, Greg Hunt, was on ABC Television’s “Lateline” program on Wednesday night pointing out that 85 per cent of this 11.8 per cent rise is attributable to the carbon tax.
The other inescapable Great Rift Valley for governments is the impact on low-income homes. IPART has estimated that the new power bills could consume up to 10 per cent of disposable income in some rural NSW households and even half that figure is a problem for the “battlers.”
The one-liners will simply stack up as reaction builds to the new power pain and that to come. Anglicare, for example, has said that some NSW families face a choice “between heating and eating.”
Finally, Hunt was quite specific in his television interview about what a new Coalition federal government will attack from the current “clean energy future” program apart from abolishing the carbon tax.
The Clean Energy Finance Corporation will go. Because the carbon tax will be gone, so will $4.5 billion in compensation to brown coal generators. The Climate Change Commission will be abolished along with the Climate Change Authority. The departments of Climate Change and the Environment will be merged.
As Hunt presents it, the Coalition is expecting a defeated, diminished Labor Party to step out of its way as it legislates to end the carbon program – if not, it will pursue the double dissolution option.
None of which will change the power bill pain in 2012-13 or 2013-14.