Archive for August, 2014

It is indeed puzzling

As green lobbyists reached in to the hyperbole drawer last night over the Warburton panel report on the renewable energy target — I especially liked the claim that Dick & Co were offering a means to “cut renewable investment off at the knees, entrench fossil fuel subsidies, endanger a growing industry and blow another hole in climate policy” — I was reading another paper that appeared at the same time: the latest of the AGL Energy economic policy series.

Posing the question “Energy-only markets and renewable energy targets: complementary policy or policy collision?,” the authors, the company’s Tim Nelson and Cameron Reid plus Judith McNeill of the University of New England, suggest that the debate that has been running for months is focusing on the wrong issue.

“It is indeed puzzling,” they argue, “why 20 per cent has been chosen as the end-goal of the RET, given the lack of any scientific basis for its adoption.

“What is important,” they say, “is the longer trend towards greater renewable renewable investment at efficient costs.

“Policymakers should address the need to incentivise investment in an optimal (NEM) plant mix while accommodating new renewable energy production and avoiding (market) conditions that facilitate excess or inefficient capital risk premiums.”

The paper is mainly devoted to explaining that investment in an optimal NEM plant mix and associated reliability is “likely to be problematic in the long run” as things stand today.

Given contracting demand and a failure to enable aged incumbent steam plant to be permanently retired while green generation adds to oversupply, the trio say, this issue may compromise system reliability.

They assert that, in the long term, a redesign of the energy-only NEM seems inevitable — and, in the meantime, barriers to generation exit need direcdt government intervention, a market-based solution or regulation.

To assist context, I’d recommend reading the 23-page AGL paper before going through the 120-page Warburton panel report. (You can find it on the AGL website.)

As for the panel report, the authors sum up their perspective in their covering letter to the Prime Minister, the Treasurer, Industry Minister Ian Macfarlane and Environment Minister Greg Hunt, the commissioning ministers: “The costs (of the RET) to the community outweigh its benefits and significant change is required.”

Whether (and which) of their options for change the government will accept remains to be seen.

Macfarlane and Hunt say the government will respond “in coming weeks.”

Whether the Senate will accept the government’s decision is another matter again.

There are, of course, two different debates, although the green brigade do their best to conflate them: the push for change to the large-scale RET and the proposal to put an end to subsidies for rooftop solar panels and solar water heaters.

In the latter case, the issue is why people who opt for PVs need to be subsidised by the rest of the mass market?

Politically, this is full of thorns because such a large pool of beneficiaries has been created by wrong-headed past Labor (federal and State) subsidy schemes.

Some 18,000 of the 21,000 jobs the green lobby asserts the Warburton panel view puts at risk are in the business of installing rooftop PVs.

This is a segment of electricity production which, as I have pointed out here before, is providing 1.6 per cent of power across the whole of Australia, not just the east coast.

The AGL paper notes that, despite mad-cap subsidies having been largely abandoned, installation of embedded generation continues at the rate of 50 MW to 60 MW a month, something the boosters don’t highlight as they warble about “destruction.”

The so-called LRET debate is an economic argument and the Warburton panel’s verdict is an economist’s perspective: there are lower-cost ways of cutting carbon emissions, the current measure will throw the wind and solar businesses a $22 billion cross-subsidy between now and 2030 and this will divert resources from more productive uses in the wider economy, lowering productivity and national income.

As well, continuing today’s LRET will push extra capacity in to the NEM in an ongoing period of falling demand.

And the artificially low NEM wholesale prices created by LRET threaten efficient investment in the market in the longer term.

Grattan Institute’s Tony Wood has said overnight that the recommendation to deliver around 20 per cent of electricity from the LRET represents “a least-bad balance between support for renewable energy and costs to consumers.”

He adds that the biggest issue will be how the final government decision avoids impacting on existing and committed investment, mostly in wind farms.

Wood suggests that the panel should be applauded for “implicitly challenging the government to focus on climate change policies with greater emphasis on delivering lower-cost alternatives for meeting the national emissions reduction target.”

What’s missing at present, of course, is the fact that the panel’s remit did not allow it to address the most sensible way forward in terms of abatement: expanding the RET in to a scheme to include all sorts of emissions reduction strategies — but there is no reason why Abbott and his ministers should not address this over the “coming weeks” before offering legislative amendments.

For my money, it is indeed puzzling why the government eschewed consideration of this approach by the review; if you are going to upset the applecart, you may as well do a thorough job.

And beyond this, as the new AGL paper trenchantly lays out, the priority need is for policymakers to “guide investors towards an economically efficient generation mix” in the NEM.

Current policy is doing anything but this, Nelson and his co-writers emphasize.

The real debate, they argue, needs to be two-pronged: how do we pursue the “optimal plant mix” and how should we structure a RET in this context, not in splendid isolation but as part of a plan to remove aged steam plant from the NEM.

Now here’s a challenge for Ian Macfarlane: take the opportunity on 10 September (when he is addressing CEDA in Sydney) to pick up the issues raised in the AGL paper and not just those canvassed by Warburton & Co — and challenge your main political opponents to engage on the real issues rather than standing on the sidelines enjoying the green mob baying at the Coalition.

After all, as with our federal budget problems, Labor are the main architects of the “policy collision” sketched by the company.

The RET-go-round 13

Is the renewable energy industry going to be “destroyed” or “hobbled” or merely given a haircut?

Can the federal government implement any recommendation from the Warburton panel review that it chooses to adopt, given the state of the Senate?

Is there an argument going on within the Abbott government about what to do?

What have Warburton and his three panel members recommended, anyway?

The only one of these questions on which we may get an answer any time soon is the last.

It is now being suggested in some media quarters that the panel report will be released this week, perhaps today.

The report isn’t yet out but the green boosters are already threatening to use the Labor plus Greens plus independent numbers in the Senate to drive an investigation of the conduct of the Warburton panel. This really is manic stuff.

It would help a bit in the general debate if the mass market media could get their heads round the fact that actual renewable energy production in Australia doesn’t mean wind farms and rooftop solar arrays; it also means longstanding hydro-electric operations.

The latest data on renewable energy supply for Australia comes from the Clean Energy Council annual report, covering calendar 2013.

Last year, “clean energy” met a little under 15 per cent of Australia’s electricity needs.

The solar power contribution was 1.6 per cent.

The wind farm contribution was four per cent.

In terms of actual output, hydro power provided 19,243 gigawatt hours versus 9,259 GWh for wind and 3,820 GWh for solar — out of a total from the renewables sector of 34,750 GWh.

Even if the Abbott governed accepted a claimed Warburton panel option to freeze the RET at near its present level — and if this acceptance was acceptable to the Senate, which has to approve any new legislation — renewable energy supply would not be “destroyed.” It would be at the above level or thereabouts — depending on how much energy Hydro Tasmania can provide to the east coast grid in any year which in turn depends on whether there is or isn’t a drought.

In addition, as I have reported here before, there are estimates from the green side that adoption of a “true 20 per cent” version would still require investment in about 4,000 megawatts of new generation by 2020, not a happy thought for those stakeholders wrestling with the impact of an already-oversupplied market on their business health.

The most sensible input to the debate (if one can use this word to describe the present shouting match) in the past week that I have seen has come from Innes Willox, who runs the Australian Industry Group.

In an op-ed in “The Australia,” he is urging on the Coalition and Labor a bipartisan approach to the trifecta of headline energy issues: affordable gas supply, carbon abatement policy and the RET.

Ongoing uncertainty about the the RET’s future — because the Senate blocks the government’s approach — will be “disastrous,” Willox asserts, because it will “strangle investment in renewables, raise wholesale power prices and add cost burdens to business.

And, he adds, if the measure stays at its present level and the target is missed because of the state of the market), penalty costs will flow through to users.

For gas supply, he argues the need for bipartisanship in Victoria and New South Wales at a State level as “governments fear being outflanked by populists.”

He calls for bans on unconventional gas development to be junked in favour of workable, science-based regulation and steps to curb market power.

“Bipartisan agreement is the gold standard” for carbon policy, too, he adds, even if this may be harder to achieve.

The need for a bipartisan approach is also taken up by the Grattan Institute’s Tony Wood in an op-ed in “The Australian Financial Review” today — along with the very valid point that partisan politics and continual policy change are “poisonous to investment that desperately needs a creditable and predictable framework to deliver reliable, affordable and sustainable energy.”

Wood adds that “policies on energy and climate change are inextricably linked and both require clear long-term direction.”

Perhaps we could have a Senate inquiry in to this; it would be far more sensible than an attempt to have a partisan beat-up of the Warburton panel.

In fact, let’s save them time and just have a Senate debate on a motion using Wood’s words in the sentence above.

Demonstrating how hard it is to get sensible political thinking on these issues, the “Australian” has also published an op-ed by independent Senator David Leyonhjelm asserting “it is not a coincidence that power prices went up so steeply when mandatory renewable energy targets were introduced.”

Frankly, there is no polite way of describing the absurdity of this statement. Perhaps the senator would like to ask the Parliamentary Library to write him a short paper on how the east coast mass market power bills doubled between 2005 and 2014.

Meanwhile the Fairfax newspapers are reporting that Environment Minister Greg Hunt’s officials have briefed cross bench senators that the government will not attempt to scrap the RET and “has a clear, long-term commitment to renewable energy.”

Unrelated to the RET row but not to the issue of mass market power bills, on which the green boosters dwell briefly in their rants about retaining the measure that will bring wind and solar farmers $billions if left as it is,  the Australian Energy Market Commission has issued a report looking at competition in the retail electricity and gas markets and claiming that households can save between $60 and $240 (‘or more”) through shopping around for better deals as they do with, say, insurance companies, phone businesses or Internet providers.

The biggest barrier to customers do so, says the commission, is lack of clear information.

Perhaps we could also have a Senate inquiry in to energy retail deregulation, tariff reform, hardship management and the provision of information to consumers?

So much more sensible than an attempt to attack the Warburton panel and much more educational for the politicians, too.

A slippery slope

Martin Ferguson says he can feel the energy in Darwin when he walks down the street. “I cannot think of another city in Australia that (better) typifies the ‘can do’ attitude of the oil and gas industry.”

Speaking at an upstream petroleum industry conference in the Northern Territory capital this month, Ferguson added: “It’s a credit to successive (NT) governments that they decided they couldn’t wait for things to happen — they’d go out and make them happen.”

The “can do” attitude Ferguson admires is much on display at the moment as NT Chief Minister Adam Giles pushes the concept of a Territory pipeline helping to link northern Australian gas to the east coast and especially New South Wales, where, when it comes to gas development, the State government (and its predecessor) is the epitome of a “can’t do” attitude.

Ferguson’s successor at the federal level, Industry Minister Ian Macfarlane, caused a stir at the start of this week when he used a “Sydney Morning Herald” interview to kick the can for a 1,000 kilometre, $1.3 billion pipeline from Alice Springs to Moomba, pointing out that this link, along with the 900 kilometre pipeline being built at the moment to bring Broome Basin gas from offshore the Kimberleys to Darwin, could be the solution to the gas supply problem in NSW — where shortages are predicted for the winters of 2016 and 2017.

Giles, who is not having any easy time politically in his jurisdiction, used the same conference to argue that the Territory is “150 years behind the rest of Australia in terms of infrastructure” and that the oil and gas industry is capable of attracting a much-needed skilled worker migration to Darwin if governments and companies can work together to develop a pipeline grid serving the east coast.

The bit that jars with me is Giles’s claim that he and Macfarlane have discussed using federal taxpayers’ funds to underwrite the proposed pipeline to Moomba if the concept “doesn’t stack up” commercially. More market intervention by politicians to pick winners in energy supply is exactly what this country doesn’t need in my opinion.

As someone in America observed the other day, subsidies are the equivalent too often of trying to push a boat away from a dock with a rope.

Just who said what about the NT concept seems a tad confused because the “Sydney Morning Herald,” in a follow-up story quotes Macfarlane’s office as “ruling out” federal funding.

The “Herald” claims there are “a number” of private sector businesses interested in pipeline links to the east coast. Apart from the Moomba option, another route being considered is transmission linking Alice Springs to Mt Isa and then on to the coast via a recently-built pipeline in to southern Queensland.

How the latter solves the “NSW problem” is a bit lost on me.

I’m all for further investment in building the gas supply industry where development is commercially viable and the real priority right now is to get the NSW government to resolve the riddle of how to bring to market the large amount of gas lying within its own borders.

To quote the NSW Business Chamber, the State “needs a strategy to ensure that consumers can access the gas they need at a competitive price.”

Network costs are a substantial part of gas supply and doesn’t take much brain power to work out that accessing the State’s own reserves (under a rigorous, evidence-based regulatory arrangement) would be one of the most cost-effective solutions for users.

Modelling done for AGL Energy, proponents of the coal seam gas development in the Gloucester Valley, claims that this project could reduce wholesale gas prices by eight per cent over the next decade.

(Wholesale gas contributes 30 per cent of the final bill.)

The same modelling calculates that pursuing the Gloucester project plus others being proposed for the State (e.g. Santos’s Pillaga development) could see the 160 petajoules of gas NSW needs each year being delivered at a 12 per cent lower price.

In the same vein, as network business Jemena has been pointing out in the past few days, the Eastern Gas pipeline, which provides half of NSW needs at present, can be expanded to ease the southern surplus hassles by bringing more gas to the State from Bass Strait. That wouldn’t cost $1.3 billion, nor need a a taxpayer handout.

Jemena’s CEO, Paul Adams, makes the sensible point that: “There is more than enough gas in the ground (on the east coast); however, we need to access it.”

No doubt we will hear more from Macfarlane about encouraging gas production when he comes to Sydney on 10 September to deliver an address to CEDA but it would be good if he could lay to rest once and for all any suggestion that his government might subsidise the Northern Territory scheme (or any other for that matter).

Intervention is a slippery slope for governments, suppliers and consumers alike. Both the West Australian and east coast electricity markets are poster children for just what a tangled web is produced when politicians start buying in to energy supply in search of solutions that are popular.

In his Darwin speech, Martin Ferguson made an important point: stakeholders in gas development, whether for export or for the domestic market, “need to be very smart” to deliver the benefits.

He observed that the international investor community perception of Australia as a welcoming destination for investment “is under challenge.” Last year the World Economic Forum dropped this country from its top 20 list of globally competitive nations and ranked us 128th out of 148 for the burden of government regulation.

I rather imagine that New South Wales is not helping a lot here.

Ferguson told his Darwin audience that natural gas is an integral part of Territory life. Gas from near Alice Springs has been fuelling Darwin’s needs for 30 years. The Darwin LNG, Ichthys and Prelude projects, he said, will “provide jobs and economic benefits for decades to come.”

Australia, he added, is a world leader in offshore gas development and can become one in all forms of onshore gas production, too.

We just need to be smart.

Subsidies in the energy sector, except to support R&D or consumers in hardship, are not smart.

RET: the Rafiki lesson

Rafiki, the omniscient monkey in “The Lion King,” has a moment where he smacks one of the other characters over the head with his stick and demands that he “look beyond what you see!”

Each time I watched this comedy and its spin-offs with my grandsons when they were small (and, believe me, that was often) I was struck too – by the utility of Rafiki’s counsel for the energy sector.

This is especially valid in the current debate about the renewable energy target; if only the green protagonists, the raft of burbling politicians and the stirring media could look beyond the current caterwauling to the larger picture.

For the radical greens, of course, the local RET rampage is really just another way station in the great global game of “saving the planet.” Today RET, tomorrow coal, the day after CSG. Business as usual.

For ordinary Australians, little though they know it, the RET is just one element influencing what electricity service they can hope to receive over the rest of this decade and beyond.

Let us pause for a moment to look at the big, big picture: the efficacy of large spending on green generation in pursuit of the climate change ambition (limiting planetary warming to two degrees).

A researcher at the International Institute for Applied Systems Analysis has calculated that global spending on abatement efforts will be need to reach $US1.1 trillion a year to meet the UN warming goal – that’s $US16.5 trillion between now and 2030 – against current spending on low carbon energy of $US200 billion annually.

This provides a context for the current local row about whether it will be better to spend an extra $12 billion over 15 years on boosting RET capital outlays to achieve an extra 100 million tonnes of carbon abatement by 2030.

(Yesterday’s “Australian Financial Review” carried a particularly interesting piece of in-depth reporting on the issue by Ben Potter under the heading “Renewable lobby plays shell game.” It’s worth reading, not least for Tony Wood nailing the critical question: “What’s the economic impact of the RET?” The paper asserts in an accompanying editorial that the cumulative cost of the schemes RECs over 15 years will be $37 billion, a wealth transfer ultimately from consumers to (mostly) wind generators. One wonders if the Warburton panel’s report addresses the plusses and minuses of this for the economy?)

The real Rafiki challenge here, however, is not this debate about whether to give wind farm developers and their service sector a further leg-up at overall consumers’ and investors’ expense, but how we manage the east coast grid to the long-term benefit of today’s 8.3 million residential customers and about one million business and public service (e.g. hospitals, education facilities) customers who are the householders’ employers and who consume some 70 per cent of all electricity sold.

The RET boosters’ argument is that, left unchanged, the measure will continue to transform the Australian energy sector over the next decade as well as save householders money on their power bills.

This propaganda says nary a word about the impact of the measure on business and especially on trade-exposed industry — and, where it is deleterious, on many thousands of jobs.

In a different, but related, context, Industry Minister Ian Macfarlane, worrying about the east coast gas situation created by radical greens and timid politicians, cried out earlier this month: “What is going to happen when thousands of people start losing their jobs?”

To which a cynic might respond, “Well, then they will have more to worry about than whether a 20 per cent RET will cost them an extra 82 cents a day per household.”

The big, big east coast picture is that, for a commodity, energy, that is fundamental to our way of living, we are heading towards a much more expensive gas supply – even when the body politic finally deals with winter shortages in the near term – and an electricity market that looks increasingly likely to have the reliability wobbles and therefore to be more expensive.

This is so much the more confounding when you take in to account that, 10 years ago, the Howard government published an energy white paper entitled (reacting to messages from focus groups) “Securing Australia’s Energy Future.”

Or that four years ago the Rudd government published a paper entitled “Strong growth, low pollution” – note the order of the goals.

Everything in the current RET row is about how much renewable capacity we will have in the market between 2020 and 2030 and nothing is about the fact that we also have today some 28,000 megawatts of coal- and gasfired capacity, the source of 82 per cent of the east coast’s electricity supply, three-quarters of which is already operating beyond its design life.

Stuffing much more wind power in to this market while not producing a viable means for outdated, emissions-intensive conventional generation to exit or necessary flexible generation to enter and while allowing very low wholesale power prices to undermine maintenance programs is not a recipe for caring for the long-term interests of consumers, residential and business.

Yet again, in pursuing a domestic energy strategy for Australia, policymakers and their advisors have become trapped in the here-and-now of political and populist debate rather than following Rafiki’s advice and looking beyond what they can see.

The delay, revealed by Macfarlane via a throw-away line to a newspaper, in producing the new iteration of the energy white paper, frustrating as this is for investors seeking more certainty and stability of policy, could be useful if the federal government takes the extra time to hear the warning voices – from the Australian Energy Market Commission as well as energy suppliers – and to focus on what needs to be done to ensure the NEM is still fit for purpose in 2020 and 2030 as well as ensuring there is a viable path to east coast gas supply security and affordability.

Let me suggest a title for the new EWP: “Restoring a secure Australian energy future.”

This task requires leaders of the present federal government (and also the Labor party) to get their heads around one of the most important challenges in Australia today: how to simultaneously provide energy security, including efficiently delivering these supplies cost-reflectively, and to impose effective environmental constraints while also supporting the strong position investors have developed for this country in global energy trading.

The RET is not a sideshow but it is also not the be-all and end-all of the job at hand.

The federal government needs to demonstrate that it fully appreciates this – and so do Shorten & Co.

The RET-go-round 12

On a Sunday when, the media tell us, the Prime Minister, Environment Minister Greg Hunt and Industry Minister Ian Macfarlane are meeting to discuss the Warburton panel report on the renewable energy target, it is interesting to comb through the various recent papers on the potential impact of changes to the measure.

Now hyperbole, verbosity, prolixity and fevered conjecture are the hallmarks of this debate, not least when attributing motives to Tony Abbott and speculating about how his cabinet may be aligned on this issue.

I pointed out to someone yesterday that one only has to read the current reporting of the behavior of the Rudd government, partly through books being published by its members, and then go back and read media coverage between late 2007 and early 2010 to appreciate just how far the haughty denizens of the Parliamentary Press Gallery can be removed from what is really going on in the corridors of power.

It can be even more interesting to go back and read the views of the Rudd government ministers through media statements and speeches to compare today’s reality with yesterday’s political spinning.

I have in front of me, for example, the discussion paper released by Penny Wong as Climate Change Minister on 26 March 2010. Here she is promising to deliver her government’s target of “ensuring that 20 per cent of Australia’s electricity supply comes from renewable sources by 2020.”

Note please the absence of the qualifying “at least” in this statement – every green booster today from Bennelong to the back of Bourke will insist that the Rudd government’s intent was “at least 20 per cent” because, of course, the measure with which the Gillard government has landed us will force close to 30 per cent renewable generation in to an overloaded market if the boosters win the day (via a Senate obstruction to an Abbott proposal to amend the legislation).

Yes, Wong & Co were expecting their RET to deliver 41,000 gigawatt hours of power supply in 2020 but that was because their government was expecting gross generation output to be around 300,000 gigawatt hours en route to 366,000 GWh in 2029-30.

I also have the ABARE “Australian energy projections” report delivered in March 2010 at hand.

In the environment ABARE painted, the government planned to have 41,000 GWh of annual utility-scale green generation from 2021 to 2030.

In an environment where power demand is declining in real terms since 2010, let alone against what the Rudd government’s best advisers expected it to be, we are looking at a demand of about 220,000 GWh in the east coast energy market by 2030 and of about 255,000 GWh overall.

You can find bar charts representing this in the modelling by Jacobs Group published by green-boosting lobby groups in the past few days.

Delivering 20 per cent of this demand from renewable generation between 2020 and 2030 requires a target of 27,000 GWh, says Jacobs.

Holding the target at 41,000 GWh will require spending $24,422 million on capacity between 2015 and 2030, says Jacobs.

Keeping it at 20 per cent will still require spending $11,358 million.

Cumulative electricity sector carbon emissions from 2015 to 2030 while retaining the current RET will be just over 2,900 million tonnes, says Jacobs.

Reducing the RET to 27,000 GWh will see aggregate emissions rise to 3,060 Mt.

In other words, the current RET will deliver an extra 160 Mt in abatement over 15 years for an additional capital outlay of $13,064 million. (As a bonus, it will help entrench the “dog’s breakfast” that the “national” — i.e. east coast — electricity market has become in the past four years.)

The current hyperbole promoted by the Clean Energy Council, and repeated word for word in a headline by “The Australian” on Friday, is “Real 20 per cent RET would decimate industry,” the use of “decimate” here, of course, being intended to imply “destroying a large portion” rather than its Roman meaning of “one in 10.”

Coming back to Penny Wong and her discussion paper, the intent of Labor policy with the RET was (1) to encourage large-scale deployment of power generation from “abundant” renewable resources and (2) support the move towards Australia’s “low pollution future.”

The implication of green propaganda over the past several months has been that reverting to a 20 per cent target – when the boosters have not been waving the supposed threat of the RET being totally axed – would see a halt in building (mainly) wind farms.

However, modelling published by green generation supporter Ric Brazzale in early August indicates that projects capable of delivering some 13,824 GWh would be required to meet the lower target.

Allowing for wind production at a (rather high) 35 per cent capacity factor, this another 4,500 megawatts of capacity will need to be built by 2020.

“Decimation”?

Outside of a few members of the federal government and the panel, no-one actually knows what Dick Warburton, Brian Fisher, Shirley In’t Veld and Matt Zema have recommended.

We may know more if the Prime Minister makes a comment after today’s ministerial meeting or perhaps when Ian Macfarlane addresses CEDA on 10 September.

But one thing is clear right now from the available facts: a decision to reduce the RET to a true 20 per cent may hurt the hip pockets of those who stand to make money from wind farm construction, servicing and operations but it would not represent a major diversion from the intent of the Labor government four years ago.

Perhaps Bill Shorten and his team could try to get their heads around this – or is the lure of politicking and trying to keep sweet with the inner-city Left to hold off the Greens in a bunch of federal seats more important than caring for the long-term interest of consumers via starting to deliver more sensible policies?

And lest we forget: forging a more sensible RET is only one step in creating a more workable NEM; figuring out how to remove the barriers to exit for outdated capacity of relatively low efficiency is arguably even more important given that policy makers are supposed to deliver reliable, affordable electricity supply with a lower environmental footprint over the long term in the best interests of the 10 million residential and business consumers on the east coast.

The RET-go-round 11

Buried at the bottom of another story about companies giving up on trying to build utility-scale solar projects (this one on the ABC) are two sentences that, given the media hullabaloo about Tony Abbott’s alleged plan to kill off the renewable energy target, should be allowed more prominence.

A spokesperson for Industry Minister Ian Macfarlane, the story reports, says the RET review by Dick Warburton’s panel “will ensure that the scheme is operating efficiently and effectively.”

Hello? This is one of two ministers, according to claims this week, who has been sidelined by Abbott as he instructs Warburton to find a way to kill the RET.

The Macfarlane spokesperson adds that “the government has sought industry consultation at every step of the review process and will respond after considering the (Warburton) report in full.”

Also, and far more worth reading than the lurid riffs on the “we’ll be roomed” theme from the green Hanrahans, are two pages on the future of energy published by “The Australian” newspaper yesterday — with two more to be published on 3 September.

Buried in another interview with Macfarlane is an important point for those concerned about energy policy: he tells “The Australian” that the energy white paper is now not going to be published until early next year, saying the reasons include the need for the government to take account of what comes from the RET review.

The supplement also contains this interesting out-take from a Newspoll survey: 64 per cent of those polled believe that using renewable energy to make electricity is a good idea “so long as they don’t have to pay more for power.”

(For the umpteenth time, here and elsewhere, I add that it would be grand if the voters got their heads around the fact that only 30 per cent of electricity supply and its costs directly affects them; the other 70 per cent falls  to commerce, manufacturing and mining and eventually to jobs.)

The poll also throws up 88 per cent of respondents supporting “government funding” for the development of renewable energy development — and who, pray, provides the government funds?  And at the expense of what other government outlays?

It is this disconnect between community “feel good” attitudes to renewables and affordability of energy that presents Macfarlane and his colleagues with such a challenge in framing a white paper to genuinely deal with both the “dog’s breakfast” of policies we have today and their political needs.

What such polling highlights above all else is that good government requires rising above both populist opinion and the seemingly endless attempts of boosters to promote their own interests in order to deliver a long-lasting framework for energy supply — and that this requires bipartisan support to overcome the cancer of investment uncertainty.

Since September, Bill Shorten & Co have been content to stand on the sidelines and cheer on those fanging Abbott and the Coalition in all areas, including energy and climate change policies generally and the RET especially. That the serious media allow this to continue without imposing equal pressure on Shorten and his front bench is really disgraceful.

Energy policy and energy supply are not sideshows.

To quote “The Australian,” the economy is “at a crossroads” and among the key issues are resources and energy policies.

One rather hopes that, by the time it publishes the second leg of its “Powering Australia” special focus, “The Australian” will have nailed the Labor leadership on its outlook for electricity for the next 5 to 15 years and has been resolute in not taking soundbites and sophistry at face value.

The current fuss over Wayne Swan’s pretty lame spell as Treasurer, brought about by his self-serving political memoir, highlights just how poor Labor was in its last spell in office in joining the dots in the resources and carbon abatement areas even though it had a generally highly-regarded energy minister.

The failure of leadership this represents could hardly present a greater contrast with the Hawke/Keating era and their efforts to pursue a better, long-term approach to energy supply.

The size of the House of Representatives majority the Coalition achieved in 2013 is such that there is little realistic chance of Labor returning to federal government before the decade’s end. The next election may be a 1998 but it won’t be a 2007.

The question the federal Labor front bench needs to ask itself is whether, in the energy space, it wants to continue to play the spoiler or whether it thinks it can help boost the long-term interests of Australian consumers by being serious about what should come next?

Meanwhile, the “Australian Financial Review,” which kickstarted the fuss about Abbott’s alleged axe manoeuvre via undisclosed sources that may, on a reading of some of the stuff around, be part of the solar-boosting clique, has given op-ed space today to Frontier Economics’ Danny Price. He makes an interesting point that, “unfortunately”, the only beneficiaries from a move to transform the RET to technological neutrality in pursuit of carbon abatement, will be electricity customers and the national economy — “and, sadly, there is nobody to advocate for these stakeholders in the current debate.”

Price means nobody in the media, of course — there are more than a few advocating for the long-term interests of customers and the best interests of the economy in the multitude of submissions that reached Warburton and his panel as well an input to the energy green paper and to the Harper inquiry in to competition policy.

The green boosters’ propaganda aim, by the way, has been well-encapsulated by England’s “The Guardian,” in its electronic guise as an Australian newspaper, which this week asserted: “Fossil-fuel-addicted energy companies are attempting to reduce or abolish Australia’s successful RET using the Warburton review as a stalking horse.”

Price,on the other hand, asserts that recent analysis of the opportunity to reduce the economic costs and price impacts of the RET by making it more technologically neutral, for example by allowing gas generators to compete with wind power and create credits to reflect carbon abated, shows that the economic hit of the measure could be lowered by a billion dollars and households saved $50 a year.

“This cost,” he adds, “could fall further if other forms of cleaner generation could also compete vigorously with gas and renewable generators.”

(The economic benefit of this happening for commerce and industry needs equal prominence, I suggest.)

Elsewhere this month I have seen an argument from the green side of the fence that reducing the RET as it stands to a “true 20 per cent” of 2020 consumption, carefully eliding the contributions of long-existing hydro-electric capacity, will require the construction of around 4,500 megawatts of new variable capacity over the rest of the decade.

So, transition to a “true 20 per cent” RET would not be a death blow for green investors, then?

Lost in this noisy debating space is the critical point that, in order to bring the east coast coast market back towards some form of greater efficiency — from the heavily over-supplied creature that it is today — will also require steps to remove the barriers to exit for the large quantity of outdated conventional generation sitting around in the NEM, either mothballed or used only occasionally.

As entities like the Australian Energy Market Commission point out, work to maintain the reliability of the generation fleet plus timely and efficient replacement of capital stock go to the heart of the long-term interests of consumers and the economy.

Something our mainstream politicians might care to take on board over the next 6-8 months, as it now turns out, that we have in hand before the white paper finally appears.

 

The beat (up) goes on

I have been engaged with the media for 55 years — as a reporter, news editor, editor, business lobbyist and, for the past decade, a writer again — and I think I can safely say I know a beat-up story when I see one.

Right at the moment we are being treated to one of the better versions I have ever seen.

Yesterday I drew attention to the start of this in a post headlined “The RET-go-round 10″ — it all begins with a  story in “The Australian Financial Review” which purports to reveal that Tony Abbott has led an intervention in the Warburton renewable energy target review, sidelining Greg Hunt and demanding an option for the measure’s abolition.

From an unnamed source, of course, and by strange coincidence appearing as a trio of green campaign organisations release a report making assertions about the impact of a cancelled or reduced RET on households. (I dealt with the guts of the “news” report yesterday.)

This morning, the beat (up) is rolling on.

The “news,” we are told, has sent shockwaves through the renewables industry.

The Clean Energy Council has pushed out a statement headlined “Reckless slashing of RET would devastate jobs and investors.”

The English newspaper “The Guardian,” which is trying to break in to the Australian scene through a web newspaper to the left of the ABC and the Fairfax papers, goes to great length to tell us what a terrible breach of faith this would be after what the Coalition said before last year’s election.

It takes the writer 27 paragraphs (out of 35) to mention that the federal government grabbed the first opportunity on Monday — an ABC radio interview with Finance Minister Mathias Cormann — to say again that it intended to keep the RET in place.

“The Age” newspaper manages to find Cormann commenting sinister because it was not Hunt who spoke.

It warns against “number crunchers” hijacking a “worthy policy” to “further a political agenda.”

Some elements of the green media see the whole thing as a Machiavellian plot by the Abbott government, which apparently has engaged in a “controlled leak” to create a big fuss and “soften the blow” when its actually reduces the measure’s 2020 target rather than axes the scheme altogether.

Needless to say The Greens’ Christine Milne is up for a quote: “Tony Abbott wants to destroy jobs, destroy investment and make power more expensive for consumers all because he wants to protect our coal-fired generators and gas companies.”

Glad you mentioned gas, senator, because destroying jobs, destroying investment and putting up energy prices may well be the outcome of the anti-CSG campaign you are supporting in New South Wales.

Back to “The Age,” which wants to remind us that “the goal of the RET is to ensure that by 2020 Australia will derive one-fifth of its electricity requirements from environmentally sustainable, clean sources.”

Quite so.

And, as the newspaper goes on to say, falling demand means the 20 per cent requirement should be well below 41,000 GWh at the end of the decade — but this, says “The Age,” is “fodder for the critics who want the target cut.”  Cutting logic that.

Meanwhile, the perpetrator of the shockwave “abolition” claim, “The Australian Financial Review,” managing to completely ignore the Cormann statement in a 26-paragraph follow-up story on Tuesday, under the headline “Slashing RET devastating,”  asserts that “government sources remain tight-lipped” after its revelation and claiming that its own sources say the “abolition option at this stage is more likely.”

The “Fin” reports one interesting thing — that the Warburton review is “now with the government,” which fits with comments I have heard that the study is complete and waiting release.

Abbott, as you may have noticed, has been a bit distracted by other matters recently, so I suppose a delay in getting the paper out is understandable but the government is doing itself no favors if it is sitting on the review and allowing the green propaganda machine to run amok.

One of the assertions that keeps doing the rounds is that scaling back the large-scale segment of the measure to a “true 20 per cent” means the target will be 27,000 GWh in 2020 but, of course, no-one can know this: forecasts of consumer demand for the past three years have been notoriously inaccurate and the actual 2020 level is anyone’s guess.

If you look at the Energy Supply Association 2014 yearbook, published last month, for example, you will see that its prediction for energy sent through the national (as opposed to east coast) grid-connected system is for 234,000 GWh in 2020-21.

Now this is for energy dispatched on to delivery lines by the power stations, not end-user consumption.

In the latest year for actual data, ESAA reports that 206,944 GWh was dispatched to east coast, Western Australian and Northern Territory grid customers and consumption was 196,987 GWh (down from 204,154 GWh in 2009-10 when Labor was legislating the current RET under the clearly-stated guise of creating a 20 per cent target; read Penny Wong’s media statements from the time).

Extrapolating, the ESAA projection for energy sent out in 2020-21 suggests consumption that financial year across the country could be 225,800 GWh — and a true 20 per cent of this would be 45,000 GWh…………..

Read that against the current perspective that the demand number in 2020 will be lower than it is today and note something else: when Gillard, Wong & Co were telling us back in 2010 that the RET would be 20 per cent of 2020 demand, Treasury was telling them that consumption at the decade’s end would be around 245,00 GWh rather than the original guess of 300,000 GWh, which was a government commodities economics agency forecast from the belly of the past decade.

Companies like Origin Energy are not stupid.

When, as it did yesterday, it tells the media that it supports a “true” 20 per cent target, journalists automatically append “winding back” because that is their mindset today — but Origin, AGL Energy and EnergyAustralia, all being smeared by Greenpeace et al today as “dirty,” know better than anyone that the ESAA projections are at least notionally on the horizon; the forecasts are drawn from the interaction of the association with its members.

(How do I know? I supervised production of the ESAA yearbook for 12 years as MD of the electricity version of the organisation.)

What we have here this week, readers, is a beat-up, fertile ground for all and sundry to run round waving their hands in alarm while the media, as is the nature of the beast, reports all the noise with bells and whistles and not the slightest attempt to delve deeper.

I reckon the best thing the federal government can do is just to publish the Warburton report if, indeed, it is now in the PM’s office.

Sitting on it so that government spinners can prepare a line is in fact doing more harm to the Coalition than good.

The policy decision can come when the government is ready; now is the time to put the report before the public.

The RET-go-round 10

Ideologues and the media love a vacuum. The absence of a policy decision means they can speculate to their heart’s content.

This wet and windy Monday (at least in Sydney) has been enlivened by the media gratifying a trio of green advocacy organisations by going ape over their propaganda using a new piece of modelling they commissioned.

For the layman (and woman), the key thing to know about models is that they are dependent on the hypotheses on which they are constructed; in this case the scenarios are leaving the renewable energy target exactly as it is (what the green movement wants), abolishing it (the scare story du jour for the RET boosters) and the reduction of the scheme to a true 20 per cent of 2020 consumption.

On the basis of the consultants’ modelling, the trio have set out to (a) scare the unlettered by aggregating the claimed gains to generators of an alleged move to reduce the RET and (b) to smear the three major energy retailers, Origin Energy, AGL Energy and EnergyAustralia, on whom the radicals, led by Greenpeace, have hung the label “dirty three” in recent months.

The proponents of this exercise must have hugged themselves with glee this morning when they saw the “Daily Telegraph” take on their play.

“A $10 billion power rip-off as families to be hit with another increase” is the headline and intro is that “a planned cut in the government’s RET will put billions in the power giants’ pockets while slugging mums and dads.”

Then the story says that the “proposed drop” will add $30 annually to average household bills — which, in passing, I point out would be an extra 58 cents a week, the obverse of the coin that RET boosters have been spinning for months to the effect that the measure as presently structured adds barely $1 a week to residential power bills.

One might also point out that $30 multiplied by nine million residential customers is $270 million annually — multiply this by 15 years (the scope of the study) and you get $4,050 million not $10 billion. Presumably the “Telegraph” owns a calculator, but then it probably has no idea how many household accounts there are.

By curious coincidence, this new propaganda effort has coincided with unnamed “sources” telling “The Australian Financial Review” that the Abbott government is moving towards abolishing the RET rather than scaling it back and that the Prime Minister has asked RET review panel chairman Dick Warburton “to do more work on the option of terminating the target altogether.”

The federal government this morning has used an ABC Radio interview with Finance Minister Mathias Cormann to retort that (a) it is not considering dropping the measure, (b) the government remains committed to a target and (c) it will wait to get the review’s report before deciding what to do.

Of course, as Winston Churchill quipped in World War 2, a lie goes round the world in the time it takes the truth to get out of bed and pull on its trousers — and Winnie had never heard of the Internet.

All these shenanigans are just foreplay to the main event when the report is finally delivered and before the Abbott cabinet makes a decision; we can expect much, much more feverish carrying on at that stage.

For my money, the most likely outcome remains the third scenario modelled for the trio of RET propagandists leading to the above-mentioned media blitz. This would see the utility-scale RET reduced to about 27,000 gigawatt hours from 2020 to 2030, instead of 41,000 GWh as at present, as a “true 20 per cent” of demand — and this in turn assumes that the decline in consumption moderates.

Built in to the modelling for the green trio is the view that “a lot of retirement and mothballing” of conventional plants occurs around 2017 as a big increase in green generation investment is forced on the market by the RET legislation requiring 41,000 GWh.

The larger increases in retail prices foreseen in the modelling take place from 2021 to 2030; the rise computed for 2015 to 2020 is one per cent. The speculation about the impact of RET changes on generator profits relates mostly to what happens from 2021 and to the view that old, coal-fired plants will benefit the most in an environment where there is no carbon price and gas prices are very high.

If you want to figure out who would be a big winner between now and 2020, I suggest you go to a chart buried in the middle of the modelling report; it shows that under the existing RET the renewables companies (and not least those providing plant and services for them) expect $18.88 billion spent on new construction (which would be mainly wind farms). The chart shows that, if the government cuts the RET back to a “true 20 per cent,” this investment falls to just under $7 billion.

The big targets for the RET boosters under the retention of today’s measure would be New South Wales ($6.2 billion), South Australia ($5.3 billion), Victoria ($3.4 billion) and Tasmania (almost $2 billion). The latter, of course, only happens if someone builds Basslink 2 to feed King Island wind to Victoria and there would have to be a pretty large outlay on transmission to bring the energy from all that South Australian wind to the eastern markets.

The other thing I can spot in the modelling is that, under the existing RET, aggregate power sector emissions from 2015 to 2030 will be 2,909 million tonnes — and under the “true 20 per cent” target they will be 3,062 Mt.

Looking at the shorter term (to 2020) retention sees cumulative emissions at 1,081 Mt and cutting it to a “true 20 per cent” delivers 1,116 Mt.

As you can see, the fate of the planet teeters on this decision.

Finally, I report that the modellers make this little point: “Electricity demand growth could be significantly lower than projected for (our) base scenario.”

Now there, if you are looking for motivation, is the fact that a “true 20 per cent” of much lower demand would be a lot less than 27,000 GWh at the decade’s end; hence the strident calls for retention of today’s RET.

It was the Hon Paul Keating, you may recall, who once said that, if you want to know who is really trying, look to self interest every time.

What to do about the NEM

My antidote to an exceedingly soggy Sunday in Sydney is lashings of tea and toast, a carefully adjusted heater, the music of one Bedrich Smetana and a renewed trawl through the 360-plus submissions that have been made to the review Ian Harper is overseeing of national competition policy.

Wisely, the energy supply sector is not ignoring the opportunity presented by the Harper review but little of what it has to say is reaching the mainstream media because, as you may have noticed, they are rather pre-occupied at present with other issues, some of major moment on the international stage, some reflecting an especially silly local political environment, some sporting and some simply sad and/or salacious or both.

With respect to the long-term interests of consumers (ie, you, me and 23 million other Australians), the arguments being presented to Harper on energy are important and none more so than those pertaining to the health and well-being of the so-called national energy market, the NEM.

Views differ, of course.

For EnergyAustralia, for example, the state of the NEM is rather dire; it sees institutional barriers and market distortions threatening efficient operation and investment and eventually the aforesaid consumer interests through higher wholesale prices or, at worst, threats to reliability of supply.

Origin Energy says that, while competition in energy markets over 15 years has been a significant achievement of the Hilmer review of the early 1990s, the NEM has not developed in exactly the way its designers envisaged. However, it adds, this should not be seen as a failure but rather as an example of how policymakers are not able to determine the evolution of such markets.

The Energy Supply Association, speaking for the industry as a whole, thinks it is premature to draw conclusions about the effectiveness of the market’s design.

Nonetheless, it warns that the price signals arising from the current set-up “appear unlikely to drive an efficient transition in the near term” and it eventually works its way round in its submission to characterizing the NEM as “a market subject to significant government interventions that struggles to deliver long-run marginal cost to investors over time.”

For customers, of course, the focus is on prices — and always is until blackouts suddenly become an unpleasant fact of life, as they did in south-east Queensland for a time — and we are still in the season of sharp rises as a result of investment in networks as well as government interventions via environmental policies and strict reliability standards.

Within the industry, the big ticket concerns relate to how costs are allocated to customers in line with the demands they place on the supply system, the generation over-supply situation and the financial and commercial barriers to capacity exiting the system.

EnergyAustralia is particularly cross with the Australian Competition & Consumer Commission, telling Harper that its attitude to the number of generation competitors is arbitrary and that it stands between the companies and a push for a more efficient market through plant closures and mergers.

The angry debate in the public arena about the renewable energy target has overwhelmed appreciation outside the energy industry of the deeper point of whether the design of an energy-only market is still appropriate.

This is exercising more than a few expert minds, however, and I expect it to be prominent on the agenda of the Eastern Australia Energy Market Outlook conference in Sydney that I am co-chairing with Bob Pritchard in mid-September.

The key concern here is that, while exchanges in the media arena about the values and vices of the RET have really not changed since 2012,  the underlying health issue for the NEM has worsened (because demand continues to decline, because the exits are blocked for plant that might otherwise be expected to have retired and because politicians can’t find a middle ground for energy and carbon policies and,worse, appear to be determined not to search for it).

ESAA tells Harper that there is a need for governments and regulators to come to terms with what ails the NEM, to understand the impediments to an efficient response to market conditions its members consider unsustainable and to get their heads around what may happen if they can’t or won’t oversee a better approach.

EnergyAustralia goes further: without a proper diagnosis and adequate treatment, it warns the NEM will cough up continuing investment in the wrong plant mix, excess withdrawal of capacity in some parts and too little elsewhere, stranding of generation that could help reduce carbon emissions efficiently and, eventually, threats to market system reliability and security.

Perhaps most worrying for serious players among policymakers — as opposed to an apparent majority of vocal MPs whose raucous, one-eyed contributions take up far too much media attention — is the fact the Australian Energy Market Commission in its cautious fashion is making noises not much at odds directionally from the bugle-blowing by business.

In its submission to Harper, the AEMC, in the middle of a polite lecture about the need for politicians to reconcile their carbon ideas with other equally important objectives (like keeping the lights on and the prices under control), observes: “Policies aimed at meeting a climate change objective may conflict with the ability of the energy-only market design to send meaningful price signals for new generation investment, which is arguably the central policy objective (of the NEM). This in turn may undermine future supply reliability.”

This, to quote some economists of my acquaintance, is non-trivial stuff.

And, to quote a very non-trivial company, BHP Billiton, while there is a need for ongoing reform of energy markets, this should be directed to promoting efficient, transparent markets that deliver commercial outcomes and, in the absence of evidence of market failure, they and the industries supporting them should be allowed to work with minimal government intervention.

It is a pretty deep irony, when you think about it, that Fred Hilmer’s competition review two decades ago was very much about getting the interfering hands of government off electricity supply — and look where we are today.

Getting the message in front of policymakers now about looking beyond the three-ring circus of the RET to the present state of the NEM and how to make it better is important — which is why I have devoted my soggy Sunday morning to this column rather than slouching in front of the TV watching replays of the Wallabies “triumphing” by managing a draw on home turf with the All Blacks.

Achievements have to be assessed in their full context, don’t you think?

Way out West

It’s on again for young and old in the electricity supply space in Western Australia.

This is not something new.

I have been observing, and sometimes participating in, the West’s electricity shenanigans for virtually a quarter of a century and it has been a wild ride.

A discussion paper from an expert panel employed by the State government, released this week, and the Hansard of a vigorous debate in the parliament in Perth between Treasurer Mike Nahan (who is also Energy Minister) and the Labor Opposition should be read by anyone who wants a refresher course in why intervention in the electricity business can be a seriously bad idea when it descends in to pursuing political purposes rather than the long-term interests of consumers.

At bottom in the SWIS circus – as in south-western integrated system, the relatively small, grid-connected bit in WA’s vast acreage with 1.1 million customers – this is all about one set of politicians interfering to suppress power bills as they try to reform the supply sector and another, faced with the subsequent non-trivial consequences, trying to set things right while outraged users, the media and their rivals have hysterics.

The remedy currently being pursued includes re-aggregating the generation and retail segments of the old utility, a move whose critics include the State’s independent regulator, whose chairman has now been drafted in to chair the new, merged company!

Not for the first time, the goings-on involve utility board members resigning and amateur dramatics over who said what to whom and when.

(I always think one could set the WA power play to music – preferably Berlioz’s “Symphonie Fantastique” with its high point the marche to the scaffold.)

Weirdly, this all got off to quite a good start back in 1992 when the Liberal government (with Colin Barnett as the Energy Minister) engaged Sir Rod Carnegie to help it reform electricity and gas supply in the mode of the changes being proposed, après Hilmer, in the East.

Later in the 1990s Carnegie’s plan delivered a considerable cut in gas bills, a reduction in power prices and the attraction of energy-intensive industry to the State.

By 2001, with Labor now in office, the Gallop government saw the need to take further reform steps, disaggregating what was by then Western Power, and – here comes the worm – promising lower end-user electricity charges.

The debate descended in to a five-year row and Labor sought in part to defuse it by overseeing the start of what became a bizarre 10-year tariff freeze.

Nahan pointed out to State parliament this week that this freeze set the scene for a taxpayer subsidy of mass market bills that is now running at $500 million annually – to which one can add another $100 million in support for customers in the huge regional areas of WA – and, despite a very unpopular 80 per cent hike in prices since the Barnett government came to office six years ago, is set to require $2.4 billion in funding over the next four years even as retail prices rise another 20 per cent in pursuit of cost-reflectivity.

Enmeshed in all this is the fact that the private sector, attracted by the Labor policies to build 3,000 megawatts of generation capacity, is a beneficiary of $1 billion a year in capacity payments in a seriously flooded market while Western Australia “enjoys” the highest wholesale power costs in the country by a long way.

Some of the smaller bits of this investor generation kit, Nahan notes, “have never and will never be turned on.”

There is such an over-supply, he adds, that the government could shut all the coal-based power stations and its biggest gas plant and still have sufficient capacity to keep the lights on.

How to make changes today that don’t have the private investors crying sovereign-risk style foul is one of the problems the Barnett government faces.

The advisory panel Nahan has set up, chaired by the extensively-experienced Paul Breslin, points out that, unlike the East, the SWIS has a network system that accounts for just 37 per cent of the final bill.

Nahan himself describes this Western Power (the network business) as “highly efficient.”

Be all this as it may, as the Treasurer observed in the parliamentary debate, what the consumers (aka voters) are concerned about is price, reliability (power security is a big deal in an isolated market) and service choice – and the government is somewhat desperate to demonstrate that it is working to overcome the sideshows to deliver these.

Breslin’s panel is due to make a final report in October and then the pollies can resume the blame game, jockeying for position ahead of the next State election, as Barnett and Nahan seek to turn the review in to a plausible plan of action.

The panel’s preliminary verdict, channeled for parliament by Nahan, is that “the market has failed to deliver competitively-priced electricity in the south-west.”

The options under consideration, he says, are to pursue a local “evolution” or to take WA in to the NEM, not via a very long cable but in terms of regulation.

Whatever happens, the Treasurer says, WA can’t go on subsidizing electricity as it is doing today. Increasing cost pressures loom, he warns, including the need to refurbish and augment the SWIS network and rising fuel costs for generation (the power stations are 45 per cent gas-fired).

His preferred direction is to hand over responsibility for future investment to the private sector – everyone, including his own Premier, has conniptions when he hints that privatizing the whole show would be a good idea – in order to take the pressure off wholesale costs.

Which, of course, has Labor jumping up and down about secret plans to sell off the WA family silver.

Meanwhile, on cue, at least one green energy booster has emerged to complain that the Breslin-chaired review has not even canvassed the role that renewable energy sources could play. Funny that.