Archive for February, 2015
One of the favorite whinges of the green boosters is that the power networks are not just not doing enough to help the solar “revolution” but they are actively trying to hinder it.
Apart from continuous flak in the electronic green fringe of the media, this gets a regular outing in the mass market media as well, so it is a bit rich that the power sector gets ignored when it seeks to answer back — as it has been doing this month at the Senate select committee hearings for an inquiry in to network performance.
If noises about “rorts” and “gold-plating” can be extracted from the Senate committee hearings, some in the media are up for it, but reporting attempts at a measured response is apparently too big an ask.
Not surprisingly, the case for the prosecution has been presented at the hearings by Greens senator Christine Milne, who led the move to set up the inquiry. Her charge is that the networks “were very keen to subsidize a massive expansion in demand” created by the boost in use of air-conditioners “but not so keen to do the same when people want to reduce demand” (by investing in PVs).
The Energy Supply Association’s Matthew Warren sought to explain what has happened by pointing out that networks have to augment the grid in new housing developments where homes are built with lots of air-conditioning but that one of the challenges of dealing with the (subsidized) rush to buy PVs is that it has occurred all over the place. A simple engineering explanation for a conspiracy theory.
In passing, Warren told senators that ESAA “accepts the reality that solar is part of the DNA of electricity supply this century.”
As for the death of the grid, an obsession for Milne and others, Warren noted — as did the Energy Networks Association in its evidence — that the best modelling around today (undertaken by the CSIRO) indicates, even under the most aggressive scenarios, that around half of electricity supply will still come to consumers via networks in mid-century. And he tried to get senators to understand that a shift to PV does not mean consumers are going off the grid. “In fact, (they) increase network reliance,” he said.
At a different hearing, ENA’s John Bradley pressed the point that solar is not going to replace the network utilities in our lifetime or that of our children.
The important issue, he said, in a situation where the grid provides “a vital enabling platform” for supply from distributed resources, is to have a framework that enables “efficient sourcing of capital for network infrastructure and its refinancing.”
As for the argument that networks are baulking the “PV revolution,” Bradley argued that, in fact, in Queensland and South Australia, there are “world-leading” rates of penetration where networks connect a solar installation every 2.8 minutes — not that different from the US, which has a very much bigger population base.
If, as the Greens and especially Milne assert, the networks are going out of their way to resist connection of solar, they are not doing a very good job of it, he said.
Milne and others of her ilk always have a glib “grab” for the media, of course. In this respect her argument is that the grid businesses are “in exactly the same position as Kodak,” a facile thought bubble that bursts as soon as it is closely examined.
Bradley pointed out to the senators that the CSIRO analysis of the most decentralized scenario by mid-century — where a third of customers left the grid or where 45 per cent of power consumption is provided via distributed energy resources — still required $300 billion in network investment over some 35 years.
The solar argy-bargy is one of the messiest parts of the electricity debate.
Superficial claims for renewables abound, easy to put forward in a few sweeping words but hard to rebut without a lengthier explanation.
An urban myth is being created that electricity networks are the enemy of the “revolution” and the contrary industry message is pretty well lost in the green cloud.
A good example is the populist push in the ACT by its government to be 90 per cent renewable by 2020.
ESAA has now published an analysis of this (you can find on the association’s website) which comes up with a higher cost for the consumers than the the Labor government claims but also makes the point that the exercise is actually procuring an amount of energy equivalent to 90 per cent of demand because there will be timing differences between the production of electricity from solar PVs and wind farms and the actual Canberran consumption profile.
In fact, says the association, “the ACT is getting a big free kick from being part of bigger NEM system,” adding that achieving the politicians’ goal from a closed system this (proposed) size would be far more expensive “as large-scale storage and widespread demand management would be required.”
This paper appeared on the association’s website a week ago. To date, media coverage has been zilch but the view continues to be propagated by green boosters that the ACT approach is a lesson to us all.
There is a price to be paid for this trend in media attention and public perception; the efforts politicians are making to boost their stocks in playing to it will again bring consequences.
The return of Labor in Victoria and Queensland on green-tinged platforms (always supposing you can put the ALP’s success in the Queensland political train wreck down to anything other than voter determination to kick out Newman, an echo of what Victorians did to Kennett in another time) bears watching in this regard.
As ESAA pointed out to the senators, governments can be “impossibly compromised” in messing with network policy and regulation (and measures, like solar subsidy schemes, that eventually impact on the grid) with their intervention contributing to the ongoing “boom and bust” cycle of investment.
As you may have noticed, the nation is in full accentuate-the-negative mode right now.
From the embattled Prime Minister on down, this is the summer of our discontent.
The media of course are wallowing in it – as are the Labor party (forgetting that surfing the waves of negativity back to government comes at a price, as it may soon learn in Queensland and Victoria).
“If it bleeds, it leads” has been a media maxim for something like 150 years here and in the other democracies.
Not even the technologies the green boosters love can escape the dominance of our current Hanrahan-esque accents most forlorn.
I see the Fairfax Sunday tabloid focusing today on “dodgy solar systems receiving federal subsidies” thanks to “an explosion of cheap, mainly Chinese, solar panels flooding the market” with “the worst systems stopping working within 12 months and others falling apart within three years.”
(Amusingly, at least to me, the Clean Energy Council, so often leading the outcry about other electricity issues, only gets to offer a rebuttal 16 paragraphs in to the “dodgy panels” story, long after the average reader has moved on.)
A fair few of the media pedlars of gloom and doom don’t let the facts get in the way of the story, of course, whether it is the latest political scuttlebutt designed to wound Tony Abbott or a new way to tell energy consumers how bad things are.
I also note another weekend Fairfax scribbler trying to conflate power disconnections with the network “death spiral” – a phrase done to death but marching on, zombie-like – while conveniently overlooking the fact that a substantial number of the disconnected come back to the system within days once they have been helped to manage their debt issues.
I have spent a chunk of the weekend wading through the Hansard reports of hearings being held by a Senate committee established to look at the performance of power networks on the flimsy basis of claims by an alleged DB “whistleblower” but obviously, from reading the Q&A between senators and witnesses, now a launching pad for an argument that the regulatory process needs to be up-ended (while evading further privatization, writing down asset values and slashing State government dividends from the sector).
More on this in a future post but it is notable that, having spent many months telling us what a “hot button” issue electricity prices are in the community, the media are barely covering the Senate committee proceedings when there is a wealth of information to hand.
(However meretricious, even base, the political motives in these cases may be, parliamentary inquiries throw up large amounts of useful insights through both submissions and evidence. Sadly, far too little of it reaches the “sensible middle” of the community because the media mob are too pre-occupied with snuffling, like pigs hunting truffles, for “rorts.”)
In the midst of brooding about all this, I find myself reading some material relating to the 55th annual conference of the Australian Petroleum Production & Exploration Association, to be held in Melbourne in late May, that highlights the obverse of the Hanrahan coin.
You can hardly escape someone being ever-so-gloomy or even embracing a disaster scenario – the past week’s one was an impending “slow train wreck” – in the coverage of the oil and gas sector at present; the unexpected dive in oil prices has spawned a sub-industry in knitting together the worst possible outlooks.
So it is interesting to say the least, in looking at the APPEA conference program (three days with some 120 speakers and an audience likely to number about 3,000), to read an abstract of what the Chevron Australia CEO, Roy Kryzwosinski, proposes to canvass in a keynote address.
Over the next few years, Kryzwosinski says, the number of LNG production trains in Australia will triple to 21, exports of gas will rise from 24 million tonnes last year to 85 Mt in 2017 and, by 2020, the upstream petroleum sector will be contributing $65 billion (or 3.5 per cent of GDP) to the national economy.
World-class developments, like the Gorgon project being completed in the West, can operate for 50 years, he points out, “delivering inter-generational benefits far outlasting their relatively short construction periods, bringing (long-term) jobs, revenue, economic growth and energy security.”
This is a perspective that tends to be obscured, shall we say, in today’s east coast row about domestic gas supply and how, locally, we would all be so much better off if the export industry didn’t exist or, at the very least, had been half-throttled at birth.
The worm in the LNG apple is the current environment of high costs and reduced global competitiveness, Kryzwosinski says, holding off another wave of gas investment that could deliver even greater Australian prosperity.
Remedying this, he plans to argue, will not only reinforce the value of the existing LNG developments and projects currently being completed but give a boost to pursuit of new opportunities (and a further flow of benefits to the community at large).
The industry focus, he says, must now broaden from capital project delivery to operating and maintaining complex facilities for the long term.
“We may soon be the biggest LNG producer – and we have the opportunity to demonstrate that we are also the best.”
You don’t have to embrace Pollyanna-ism to appreciate what Kryzwosinski is on about; just note that the summer of discontent – which the media mob and other vested interests are doing their best to turn in to a year of woe – has a flipside and that failing to fully appreciate it and pursue the opportunities it presents is risky business for Australians collectively.
In similar vein, there are substantial issues relating to cost-efficient electricity supply and sufficient domestic gas supply, no question, but there are genuine opportunities as well to improve the service environment which can’t be properly pursued in the present mindset that the sectors are an enemy of the people.
Keeping the debate focused on only the negatives may suit the mass media and those with vested interests in up-ending the present economic and regulatory systems to suit their ideological bent but it isn’t in the national collective interest.
As a metaphor for the messy state of energy policymaking, it is hard to beat.
It’s now 12 months since the federal Coalition launched a review of the renewable energy target by a panel chaired by Dick Warburton and it is six months since the study’s report was released.
In the meantime the Climate Change Authority has itself held a quickie review of the measure, arguing the legislation required it to do so.
And where are we now?
Well may you ask because the RET’s future is as much up in the air today as it was a year ago.
To say that the situation, from the perspective of investors, existing and prospective, in the east coast electricity market is a diabolical is not (much) hyperbole.
Apart from any other aspect, it would require about 2,500 wind turbines to be constructed in the 58 months between now and 2020 to meet the existing large-scale RET — something that just isn’t going to happen.
Which raises the question of what cost impact will be imposed on consumers when the measure’s penalty provisions kick in — again, there are lots of views and not any real clarity.
Media speculation about what might happen in the ongoing negotiations between the Coalition and the ALP, reportedly now being resumed, suggests the government’s latest position is to argue for the target to be altered from 41,000 gigawatt hours at the decade’s end to between 31,000 and 33,000 GWh. Labor’s position is said to be “somewhere in the mid- to high 30,000 GWh range.
The idea of exemptions from the RET for large, trade-exposed industry is also floating still amid the jawboning.
The market issue, of courser, is much broader than the “broken” RET — as retiring AGL Energy CEO Michael Fraser dubbed it.
In the Energy Supply Association’s words, the “elephant in the room” is the inability of wannabe investors in power generation to find financiers willing to lend them money to build kit in an over-stuffed market regardless of the technology proposed.
Surplus capacity in the NEM this year is of the order of 9,000 megawatts, concentrated in Queensland, New South Wales and Victoria.
The green brigade’s argument is that this can all be resolved by leaving the RET as it is and finding the means of sweeping older, high-emitting generation from the market.
So easy to say,so hard to bring about.
Which raises the question of what quality wholesale power supply we will have in the medium term? I see a Credit Suisse analyst describing the east coast gas market as a “slow train crash” — is this applicable also to the NEM over a slightly longer time frame?
While all this has been going on — with nothing meaningful in terms of long-term, efficient policy being achieved — the actual numbers for the east coast for grid-connected power production last calendar year throw up a slight rise for wind power (8,508 GWh or 4.4 per cent of output) and a sharp fall for hydro-electric supply (from 18,568 GWh in 2013 to 13,895 GWh in 2014, the latter equalling 7.2 per cent of output).
In the 12 months of futile debate, NEM production from black coal power stations fell slightly to 96,089 GWh (49.7 per cent of the market), brown coal’s share rose slightly (49,158 GWh, 25.4 per cent) and gas-fuelled plant contributed more (rising to 25,312 GWh or 13.1 per cent of the market). In other words, fossil fuel’s market share rose two per cent, a cause for hand-wringing in green quarters.
However, it pays to look at data carefully.
Analysts Pitt & Sherry, whose monthly “CEDEX” report is always interesting, have just published comments pointing out that black coal generation in New South Wales in the past 12 months is 10 per cent below what it was at the commencement of the NEM in 1999 and is 25 per cent lower than the peak reached in 2008. Black coal’s share of power production in NSW is now 76 per cent of demand, down from 88 per cent in 2009.
Brown coal generation, however, is back to its previous levels, not least because its output is being sold to NSW, South Australia and Tasmania as well as Victoria.
Gyrations of this sort are a product of the inability of legislators to impose what professor Chris Greig (writing in the latest issue of the “Focus” magazine published by the Academy of Technological Sciences & Engineering with a concentration this month on energy opportunities) describes as a balanced, co-ordinated and stable policies.
What aspect of the handling of the RET issue over the past 12 months could one identify as in any way contributing to Greig’s trifecta?
The University of Queensland academic, who heads the UQ Energy Initiative, is calling for a robust and transparent approach to energy policy overall, one that involves stakeholders in a more participatory process, allowing for regular review and revision because of a rapidly changing economic, environmental and social landscaper — and one that increases trust by the community in both industry and government.
To all of which I would add the point that addressing issues piecemeal — as is being done with the RET — rather than in a holistic fashion is not going to be effective no matter how much consultation is involved.
Another contributor to the “Focus” edition says we need a bipartisan vision and a 20 year time-frame — “Is this too much to ask?” says company director Erica Smyth.
The only response as we contemplate the RET wreckage and the broader NEM situation is “apparently so.”
The ink was hardly dry (so to speak) on my last post here (“See how they vote,” 13 February) when my attention was caught by a story in the “Sydney Morning Herald” prominently quoting retiring AGL chief executive Michael Fraser to the effect that Bass Strait is the largest potential east coast provider of the fuel from currently uncommitted reserves.
How many “SMH” readers (aka New South Wales voters, who will go to the polls on 28 March) actually wade through the paper to the business pages and read these stories is a question in itself.
Presumably the few who do may go “Oh, that’s all right then; our gas crisis is solved,” given that Fraser’s comment is not hedged by the reporter with any over-arching background.
The problem, of course, is nowhere near being solved. We are not, to steal from Churchill, at the beginning of the end of the story or even the end of the beginning.
One of my useful resources at the moment is the NSW Legislative Council select committee considering the supply and cost of gas (and liquid fuels, too).
If you go on to the LegCo website, you will find not just the 36 submissions the committee has received but also the Hansard reports of two days of hearings it held in late January and early February. Only a fragment of this material finds its way in to the mass media.
The back story to thoughts on where NSW’s future gas may be sourced relates to when the coal seam gas developments being pursued within State borders may come on stream versus when shortfalls in winter supply may emerge and, if there are problems, at what cost can alternative sources deliver fuel to consumers who need 150 petajoules a year and 600 terajoules on a winter day of peak demand.
AGL’s latest comment (by Fraser) is that the company is targeting production from Gloucester Valley in 2018. It has also repeatedly warned of winter shortfalls of up to 21 days from next year.
Santos (via James Baulderstone) says the Pilliga project could be flowing gas in 2017 if the State government fast-tracks the regulatory process and (in effect), if the red tape logjam isn’t cleared soon, you can pick a date between then and 2019.
To which one might add “Or not at all” if the Greens have their way as they might if NSW voters emulate those across the Tweed River and deliver Labor back in to office, dependent on fringe votes, bearing in mind the noises on CSG new leader Luke Foley has been making.
Foley, who has a substantial gas-using manufacturing industry in the western Sydney seat in which the ALP machine is installing him on transfer from the Legislative Council, says: “It is time to go back to the drawing boards on CSG. It is time for a State-wide moratorium on CSG.”
Assuming, as I do, that the NSW electors will not bring Labor in from the political cold (and I was wrong about Queensland even though I allowed for a swing of about 20 seats to the ALP), the gas-sourcing issue remains.
I wrote in my last post about the Coalition’s apparent trust in an NT answer to the supply issue (using Energy Minister Anthony Roberts’s evidence to the LegCo committee); here is what Santos believes about the Bass Strait option — via Baulderstone’s response to MPs’ questions about 100 per cent (rather than 50 per cent at present) of demand being sourced from Victoria’s waters:
Paraphrased, he said pipeline capacity from Victoria to serve NSW is now about 400 terajoules a day and the latter’s needs (mainly in Greater Sydney) are 600 TJ at times of peak (winter) demand. Who, he asked, will spend the hundreds of millions of dollar needed to expand the Bass Strait pipeline capacity as well as a lot more (“maybe billions of dollars”) to provide extra production infrastructure?
He put a price tag on the Kipper-Turrum gas development (the latest for the Strait, in which Santos is an investor) at about $2 billion. (Overall, the Kipper-Tuna-Turrum oil and gas project is estimated to cost $4.5 billion.)
Challenged on the Greens’ latest love child in the CSG debate – the claim by a Melbourne University study that NSW gas demand will be slashed by half over the next decade because of high prices, so the shortfall issue (say the radicals) does not arise – Baulderstone argued back that in-borders production could keep prices at a much lower level than modelled by the academics, reduce the loss of demand and perhaps even encouraging new manufacturing development in the State.
And he pointed out that allowing prices to soar by stifling production will (a) see thousands of jobs lost in NSW, (b) drive household and other consumers to move to electricity and (c) when they do, the electrons will come from coal-fired power stations, increasing carbon emissions.
All of which goes to demonstrate that the problem for SMH readers, “our” ABC viewers and listeners and the millions of others due to vote in the NSW election who don’t subscribe to radical green philosophies, or even pale green versions, is that the broader picture is continuously out of focus for them. In order to contribute a genuinely informed vote, you have first to be properly informed. Fat chance in the present environment.
An important part problem is that, in mainstream politics, opposition for opposition’s sake is still a key driver and this, in NSW, apparently precludes policy positions being taken on this vital issue that rise above what the inner-city Left believes and what the rural green commandoes, who call these suburbs home, are peddling every day on radio, television and social media.
(Postscript: It is interesting in this context to see that the leaders of the three main UK parties , David Cameron, Ed Miliband and Nick Clegg, in an agreement brokered by environmental charities and a green think tank, have signed a pre-election statement that includes commitments to work together on a “carbon budget” for Britain and to “accelerate the transition to an efficient, low-carbon economy” and also that this was immediately described by the leader of the British Greens as a pledge “to be treated with scepticism.”
(It is then worth reading the Greens’ submission to the NSW LegCo committee to appreciate the full flavor of their local approach.
(It includes phasing out east coast LNG exports and shrinking the size of the domestic gas market. We need, it says, “a rapid and planned transition to an economy that does not use or export fossil gas.”
(Why, I wonder, does the mass market media not find this of interest? They are quick enough to seize on any views perceived to be disconnected from reality that they can attribute to conservatives or Palmer’s lot.)
As the New South Wales State election looms (28 March), the issue of gas supply is climbing up the agenda of controversy for the campaign.
Voters will be asked to elect 93 MPs for the State lower house and 21 (half) for the upper house. There will be up to five million at the polls (4.6 million in 2011) – although nearly enough to populate Newcastle can be expected to be no-shows or “informal” voters.
How many of these folk have any real idea of what is going on in gas supply is not hard to answer: hardly any and those that tend to be focused on the issue are from the radical end of the spectrum, hell-bent on baulking any development.
The Greens want to see the election as a referendum on fracking and banning CSG activity across the State.
In one respect, it is easy to dismiss this perspective as being not of this world and limited to a relative few of the voting population, but the peculiar Australian addiction to preferential voting is the bugger factor.
If you look at the statistics for the 31 January vote in Queensland, you find that, with first-past-the-post voting (as in the UK, Canada or the US), the LNP would now be settling in to its second term – on primary votes it “won” 51 seats versus 35 for Labor, two for the Katter party and one independent.
(In the same vein, Labor would still have won by the Victorian State election last November quite comfortably – with 47 seats to the Coalition’s 38, two to the Greens and an independent.)
I track the Greens support around the country and it is minimal in terms of actual votes; its impact is distorted by the preferential system and because its voice is given almost equal play with the major parties in the media.
Thus in Queensland last month, the Greens attracted a shade under 220,000 primary votes despite running in all 89 seats. By comparison, the combined vote for Palmer’s lot, Katter’s party, Family First and One Nation was 237,000.
In Victoria last November, the Greens pulled 385,000 primary votes in the lower house (versus almost 2.7 million for the main parties), roughly the same as all the rag-bag of little groups and independents competing in that poll.
In short, add together the Greens’ primary votes across eastern Australia and they are barely one in 10 of those casting a ballot (and less of those entitled to vote) but they cast a long shadow in the media (and therefore in what J.Citizen gets to see, hear and read) because in journalistic terms they are “good copy.”
The core issue here is that the real impact of the Greens’ approach on the lives of ordinary Australians is lost to view.
Take as an example the current inquiry in to gas issues by a NSW Legislative Council select committee.
NSW Energy Minister Anthony Roberts provided this data to the committee: in 2014 the State consumed 150 petajoules of gas – of which 52.2 per cent was used industrially, 6.2 per cent commercially and 26.4 per cent fuelled power generation.
Residential demand – 39 per cent of homes are connected to gas mains – accounted for 14.3 per cent of consumption.
It is perfectly obvious from these stats that a supply shortage is a large problem for business and thus for the State economy and for jobs.
In this context, note that David Knox, the Santos CEO, is saying this week that his company now expects – because, I point out, of the radicals’ campaigning and the dilatoriness of government in dealing with the issue – to be unable to deliver Pilliga gas to NSW “before the back end of the decade.”
Roberts has an obsession with his government’s inability, because of commercial-in-confidence contracts, to understand how much gas is in the east coast system at a given moment; this is a classic example of taking careful aim at a tree and disregarding the forest.
The single big-ticket issue in energy for NSW today is actually having a physical supply of gas from within its borders when the current contracts with suppliers over its borders run out.
Roberts is also hanging his hat on an Australian Energy Market Operator prediction (made in 2013) that, even with the bedevilled Pilliga and Gloucester Valley projects delivering CSG, the State will have “small to moderate” shortfalls of gas in winter 2018.
Companies like AGL Energy, the largest NSW retailer, say the problem will begin in winter 2016.
At least Roberts concedes this much: “There may be some disagreement amongst models on exactly when NSW faces shortages; however, there is no disagreement that we face potential shortages over the next five years.”
Large industrial users in the State, employing some 300,000 people, are affected by this prospect.
The Greens and others are trying to introduce in to the debate the point that the problem will go away because demand is dipping and will fall a lot more.
They avert their gaze from the fact that half the State supply comes from the Cooper Basin and losing this by 2017-18 must have an impact on users regardless of any further consumption slackening — and that this slackening leads to substantial job losses over time.
Half the State supply comes via the Moomba pipeline and half the demand is in the industrial sector; the implication, surely, is obvious.
The other part of the equation that gets ignored – Roberts rabbited on to the LegCo committee about solar, wind and geothermal power alternatives – is that, if there is a gas shortage and if gas prices stick at very high levels, the use of the fuel to make electricity will fall and the gap will be filled by existing coal-fired power stations, all of them relatively old and high-emitters of greenhouse gases.
The get-out-of-jail card on which the Baird government is gambling is that there is a lot of gas in the Northern Territory and a new pipeline can bring this to NSW.
The obvious questions are when and at what price?
And what if the NT-based producers can get better value for their shareholders by selling the gas to the LNG operators at Gladstone?
A pipeline is a $1.2 billion capital project. Its users will need the best returns they can get.
The Greens don’t want this gas development (or any other) to go ahead either, by the way; will they play Lock the Gate games in the NT too?
My point today is that 90 per cent of the facts in this matter are escaping 90 per cent of the voters in NSW.
Where in the popular media is there an adequate level of information for “the sensible middle” of the electorate?
In a polling system where the votes of a radicalized minority can influence seat outcomes through preferential voting, affecting the interests of the community at large, is this democracy?
The Energy Supply Association has leapt on Premier Jay Weatherill’s decision to launch a royal commission investigation of further nuclear industry development options for South Australia.
ESAA’s Matthew Warren declares that the inquiry — the first formal step on nuclear issues in Australia since John Howard set up a review chaired by Ziggy Switkowski in 2006 — should include consideration of the use of nuclear power (which Weatherill indicates that it will).
And he is right, also, to point out that we are not going to see investment in any form of new power generation on the east coast until the body politic, federal and State, resolves the “virtually unbankable” market issue caused by policy uncertainty and incoherent political intervention.
Weatherill’s step reminds us that the energy white paper, supposedly due for completion by the end of next month, needs to address the point that all power generation technologies should have the opportunity to contribute to this century’s challenge of providing Australia with low-emission, reliable and affordable electricity.
(Ian Macfarlane’s response to the Weatherill move, allowing for the fact that he has been personally a bit distracted by the leadership carry-on in the federal Liberal Party, has been to observe that the white paper process is “considering all options” for our energy needs.)
Nuclear power is just one of a large number of energy and other issues where — to steal a quote from Robert Pritchard’s commentary in “Inside Canberra” last week about public trust in governments — the public simply doesn’t know what to believe any more.
Pritchard asserts that, in an environment where public mistrust provides a fertile ground for activism (think coal seam gas development in Victoria and New South Wales), industry is disconcerted by the too-frequent government response that the onus is on business to demonstrate its “social licence.”
It’s a fact that we have had, and are having, far too many inquiries on energy issues, most of them providing cover for governments not wanting to make decisions (think the new Victorian government’s a parliamentary review in to onshore gas development in the State) but Weatherill has no other avenue open in the nuclear arena; merely to say “nuclear power” is an invitation to the partisan and the poorly informed in Australia to launch yet more rafts of social media ranting.
As an example, within hours of the Weatherill announcement, the Australian Conservation Foundation was rejecting the royal commission as “a Trojan horse for getting a nuclear waste dump built in the State.”
The nuclear power option, according to the ACF, is “fanciful” because of “the outstanding growth of renewable alternatives.”
Weatherill himself acknowledges that he has been opposed to nuclear energy in the past but, he says, he has recently “become more open-minded about the potential for economic benefits for South Australia.”
An arch-populist of our past, former Prime Minister Bob Hawke, has gone public in support of Weatherill’s decision, arguing that nuclear power can be an important part of dealing with the global warming challenge.
“Ignorance is the enemy of good policy,” Hawke retorts to those criticising Weatherill.
One could point to a few decisions during his regime where cynical vote-catching dominated policy — “Whatever it takes” is the title of the book by his key political operator, Graham Richardson — but the point he makes should be painted on the office walls of our policymakers.
Labor leader Bill Shorten has put out a statement that the federal party has “a long-standing position (against) nuclear power, based on the best available expert advice.”
When the denizens of the Canberra Press Gallery have time, could they ask Shorten to provide a list of the “best advice” on which he is relying?
I’ll bet they would be on Tony Abbott like ferrets for this information if he said any such thing. (He actually said last year that he would be “fine” with nuclear power proposals for Australia.)
Would Shorten consider Carol Browner, who headed the American EPA in Bill Clinton’s administration and is something of a US environmental poster child, an expert?
Two weeks ago she was telling a forum that “nuclear power’s carbon-free generation has to be in the mix given the climate threats posed by traditional fossil fuels.”
She says taking nuclear energy off the table is “simply irresponsible.”
She also points to Germany as an example but not as the deep greens here would.
“We now see the results of Germany’s decision to bow out of nuclear,” she says. “Yes, renewables have grown (there) but we also see a growth in coal-fired generation.”
(Browner, by the way, says that, until now, she has kept her flip-flop on nukes quiet because, you know, it would create ructions at the dinner tables she frequents.)
Meanwhile, not surprisingly in the poisoned atmosphere of politics in SA and Australia more generally, the State Liberal leader Steven Marshall has pounced on Weatherill’s views, declaring him to have more positions on nuclear energy than are in the Karma Sutra and asserting that the move is an effort to distract public attention from State health service issues, demonstrating yet again that the gaze of many of our politicians, including most leading ones, is concentrated on their navels.
Marshall clearly is unimpressed with the view of Foreign Minister Julie Bishop that Australia “needs a fresh discussion” about nuclear energy.
It needs to be pointed out that, should the SA royal commission recommend use of nuclear energy in the State, federal legislation banning the technology will need to be either amended or repealed.
The SA move, therefore, has significance for the federal political arena; the white paper provides an important opportunity for the Coalition to state its position and also, in responding to it, for Bill Shorten and his shadow cabinet to get their heads around the whole carbon abatement and energy issue in the national interest and not just to keep the Greens from eating their lunch in marginal seats.
Of all the things that need attention on Australia’s energy front today, none outranks the need for balance in policy and regulation — hence the theme of the 2015 On Power yearbook — “A Need for Balance — which publishers Armstrong Q and I will be launching on 10 March.
There is almost no aspect of the electricity scene that is not unbalanced to a greater or lesser extent, perhaps most of all with respect to the approach of the major political parties to the big issues — ranging from tariff restructuring for electricity networks to a workable southerns states’ approach to natural gas development to the renewable energy target and to the over-arching policy on greenhouse gas abatement. And certainly not forgetting the privatisation issue.
It may not, as I see the Grattan Institute’s Tony Wood saying to “The Australian” newspaper today, make sense for governments to own electricity networks but persuading voters to this point of view, on the evidence of Saturday’s election, remains a big problem.
The new yearbook examines the state of play in power privatisation now that the Queensland proposals of the LNP government have been scuppered by voters and as the NSW Coalition government prepares to go to the polls, an exercise that looked like a cakewalk for the Liberals and Nationals until last weekend’s boilover changed the political landscape well beyond the State borders, not least, as we are seeing, in federal politics.
In the 2015 On Power yearbook I have endeavoured to set the scene for the necessary national discussion on rebalancing Australia’s energy approach across the electricity spectrum, bearing in mind the parent website’s focus is on the east coast power business, the so-called national electricity market — which, let us remember, features almost 48,000 megawatts of generation capacity (about 10,000 MW more than it needs), 9.5 million customers (and in all 19 million energy users) living in an area the size of Western Europe and a turnover of some $11 billion a year.
Or, to put it another way, the biggest and most important machine in the country.
This year the book, which was first published in 2014 and is a successor to the earlier “Powering Australia” series I edited in the previous decade, scans the shift of consumers from the back seat to the front seat of electricity supply and what they are looking for from this essential service, a seminal development that both distributors and retailers are still struggling to manage.
It examines the wholesale power market (the actual NEM), which is at a crossroads thanks to political intervention fuelling the over-supply of capacity, seriously clouding the price signals that the market is designed to send to generation investors in particular.
It looks at the future shape of power generation at a point where investors are effectively on strike and the inability of policymakers to reach agreement across party lines on a long-lasting carbon abatement strategy is a cancer eating at the body electric.
And it examines the uphill path to making carbon capture and storage a commercially viable technology in Australia — not to save old, emissions-intensive plants but as a necessity is both new coal and gas power stations are to be part of the future NEM.
It canvasses the network tariff restructuring challenge and the overall need for politicians to eschew picking winners in power supply.
The book also deals with the plethora of inquiries in to energy issues and the frustration suppliers feel at dealing with them even as a new Senate inquiry rolls on and the Victorian government launches another state examination of onshore gas exploration and development, this one through the State parliament.
The content is coloured by my view that the new normal for energy policymaking appears to be endless shuffling of ideas, ideologies and programs, not always in full consultation with those who are most affected by decisions.
This, as I keep writing on this blog, in the Coolibah monthly newsletter (the February issue of which is now up on this website) and in “Business Spectator,” is a real problem in terms of the long-term health of an industry that needs to think in decades, not months or the the electoral cycle. Decisions made in 2015 and 2016 will impact down the rest of the decade and in to the 2020s.
I have sought in the 2015 On Power yearbook to canvass the key issues rather than argue the case for or against points of view. My aim is to provide a marker in the national energy landscape at an important time of political change and shape-shifting for energy supply. Reading the book, I hope, will provide an opportunity to pause and assess the key challenges facing policymakers and regulators in mid-decade.
It will be given to all the serving east coast MPs and to the members of Federal Parliament, so hopefully it will help a key stakeholder audience better understand the dimensions of one of their key tasks.
In introduced the 2014 yearbook, I wrote that the rest of this decade will be the roller coaster years for both electricity and gas supply on the Australian east coast. Can anyone doubt that in the past few days the roller coaster has just sped up — and its destination has become more obscured by the fog of political war.
If you would like to obtain a copy of the 2015 On Power yearbook, please visit this site for all the details of how to do so: http://www.onpower.com.au/2014-annual-book/order-your-copy-now.html
Whatever else the political events in Victoria (recently), Queensland and the federal arena (now) and New South Wales (just ahead) throw up, one thing is certain: collectively they have the energy investing community thoroughly spooked.
This isn’t just my opinion; Robert Pritchard, executive director of the Energy Policy Institute, tells me: “almost everyone I speak to is spooked by the fear of policy reversals.”
Ever since the global financial crisis, he adds, EPIA and many others (including me) have been banging on about the investor need for greater energy policy certainty, but the situation is now harder to fathom than ever.
Pritchard and I will have an opportunity to test this opinion in Sydney on 20 March.
He will be running, and I will be attending, the 2015 Energy State of the Nation one-day forum, now in its ninth year, and a more-than-useful networking opportunity across the spectrum of energy strategy.
EPIA has picked “getting the priorities right” as the theme for the 2015 event and will be using it to test opinion on its argument, expressed in its submission to the energy white paper process (remember that?), which argued strongly that we simply must lift national energy policy to “investment grade.”
I find it as impossible to argue with the institute view that we need an apolitical, bipartisan process involving stakeholder participation from the community, industry and all levels of government, a process not vulnerable to election cycles, to achieve this goal as I do to disagree with the widely held perception among corporate types that right now we have Buckley’s chance of seeing it happen.
Among the questions Pritchard and EPIA want to pose to the ESON attendees at next month’s meeting are: when and how can we start making a transition to a low-carbon society, when is eastern Australian gas supply going to run out and what will happen then, and how do we encourage innovation?
The conference itself is divided in to four segments.
It’s going to kick off with a presentation on China’s energy outlook by professor Yang Yufeng, deputy director of that country’s energy research institute, and another by the Commonwealth Bank’s Richard Grace on the currency markets outlook.
Yang is the co-author of a 700-page book on China’s energy future.
Then ESON will shift gear to a review of challenges for future energy regulation by professor Tim Stone of University College London, well known to a lot of us as a former KPMG executive and an adviser to Prime Minister Tony Blair, plus presentations on electricity and gas network issues locally.
Stone is strongly of the view that traditional systems of energy regulation must be transformed to deal with today’s (and tomorrow’s) market conditions.
Part three, to be chaired by professor Chris Greig of the University of Queensland’s Energy Initiative, is going to look at energy innovation and, in part, why this cannot be limited to just renewable energy.
The final segment will focus on integration of energy and carbon abatement policies – both in Australia and overseas – through a panel that will include Stone and will be moderated by Barry Worthington, head of the US Energy Association in Washington DC.
If you want to know more, go to www.energypolicyinstitute.com.au.
Meanwhile on the topic of the energy white paper, which is supposed to be finalized by the end of next month, Pritchard thinks there are “three deep mysteries” that are going to prevent it from delivering the much-needed Australian policy certainty.
The first, he tells me, is where global energy prices may be heading, not just in the short term, but over the medium and long terms too.
The second is where global climate change negotiations may go – the UN Paris negotiations in December are supposed to produce the answer, but we all know that they won’t – and the third is very domestic: who will govern in Australia at federal, State and Territory levels between now and, say, 2025?
Pritchard is of the view that longevity in government office is probably harder now than at any time in memory and, he rightly says, the fear of short-lived regimes is a turn-off for investors because, at present, each change brings sudden swerves in energy policy.
Witness what is likely to happen in Queensland after last Saturday’s butchery at the polls – the more so as it is looking increasingly likely that there will be a hung parliament in Brisbane.
Before we get too insular in contemplating our woes, Pritchard makes the fair point that this governance issue is not confined to Australia.
“That’s why we have invited four overseas experts to speak at ESON,” he says.
At least I can look forward to a really interesting month in March.
Apart from ESON, which I see as a premier opportunity for thinking about the big energy issues, March will also feature the Quest Events’ Australian Domestic Gas Outlook Conference, which I am co-chairing, and the opening days of the month will see the publication of my second On Power yearbook – I am working with my friends at Armstrong Q corporate design, communications and publishing company right now to finalize the new edition, which has the highly appropriate theme, I think, of “A need for balance.”
That’s really the over-arching thought we all need to bear in mind, and no-one more so than our politicians.
Regrettably, far too many of them are obsessed with their own balancing acts at the moment.
Whatever else Queensland will be after this extraordinary State election is played out – and a minority government dependent on two supporters of Bob Katter and an independent is a possibility – one thing is fairly certain: it will be in a state of confusion over energy for some time to come.
Labor leader Annastacia Palaszczuk is not just pledged to bin the Liberal National Party proposals for power sector privatization but to create two mega-companies for generation and networks and to mess with the latter’s budgets and charges.
Pursuit of her plan will create a power station business with direct ownership of 63 per cent of the State’s total capacity and 91 per cent of its intermediate supply, something that the Australian Competition & Consumer Commission will dislike intensely. (The ACCC is already on the record — when an LNP win was expected — warning against establishing a private sector set-up with this sort of market clout.)
Obviously the immediate public and media focus in the aftermath of the election is on the federal scene, and the fate of Prime Minister Tony Abbott in particular – the ABC’s Chris Uhlmann said on Sunday that the catastrophe in Queensland has rocked the federal Coalition to its core – but, when the dust eventually settles, some attention will turn to the power asset ownership issue, not least because it will be high on the political agenda again in the New South Wales election at the end of March.
It hardly seems debatable that the Queensland electorate rejected privatization, but whether this will happen in NSW is another matter.
Nonetheless, the vigor with which Queenslanders shunned the policy must seem this weekend like a Shane Warne super-legbreak to NSW Premier Mike Baird.
To quote Uhlmann again, no-one, not even Labor, really expected the LNP government to be defeated on Saturday.
Nationally, while the prime ministership is a far greater issue than power station ownership, eventually the shape of the Queensland generation sector, as proposed by Palaszczuk, will become a matter of importance to the east coast market.
At the moment, as the Australian Energy Regulator points out, CS Energy and Stanwell Corporation control 66 per cent of generation in Queensland when their purchase agreements over private sector capacity (such as the Gladstone power station) are taken in to account.
The largest private sector generation in the State today is Intergen (10 per cent of capacity) and Origin Energy (8 per cent).
As for the rest of energy policy in Queensland under Labor, much may depend on how far Palaszczuk’s administration is beholden to Bob Katter for holding on to office. Palaszczuk pledged in the campaign not to negotiate with minor parties in a hung parliament, but that was then………
Katter’s hobby horse is creation of a “Northern Australian clean energy corridor” linking Mt Isa to Townsville, including a large wind farm and a solar bio-fuels plant. He had Wayne Swan promising a $300 million federal grant only a few years ago.
Going back to Palaszczuk’s campaign, which focused on privatization and little else in the energy area, Labor is committed to setting up an independent Queensland Productivity Commission. Among its tasks will be examining “a fair price for solar power” and another will be looking at a back-to-the-future move to give local government a role in remote area power supply.
Most importantly in the State energy space perhaps, given the role of network charges in the consumer power bill, Palaszczuk in government will intervene in the distribution and transmission activities, promising to sequester a large part of their tax and dividend payments for debt reduction, to control their outlays and to sit on their charges.
She perhaps ought to consult Peter Beattie on how well this sort of thing worked in a past ALP administration.
Merging the trio of network businesses, she claims, will deliver savings of $150 million a year – to be applied to the government’s overall debt reduction.
Meanwhile, on the eve of the election, the largest new development in Queensland energy was more or less buried by all the other carrying-on: Royal Dutch Shell announced it would not proceed with the $25 billion Arrow LNG project as part of its belt-buckling program reacting to the global oil price slump.
Work will continue, however, on developing the Arrow coal seam gas fields in Queensland, directing the production to other users.
On a still broader front, perhaps the most insightful comment in the immediate aftermath of the Queensland election has come from the Australian Financial Review’s long-experienced Tony Walker.
Campbell Newman, he writes, is the victim of the fickleness of voters in a new political era that demands instant gratification.
Swinging voters, he suggests, may represent 30 per cent or more of a volatile electorate.
Successful political leaders now, opines Walker, have to be both likeable and competent. And voters do not react well to surprises (like having a summer holidays elections sprung on them?)