Giving the message

There’s a clear coincidence of diagnosis about the east coast electricity market emerging for Alan Finkel’s task force as stakeholder submissions start to trickle in to the public arena.

What matters, of course, is the remedy Finkel et Cie put forward to the federal, State and Territory governments – and whether the body politic can actually bring itself to pursue the advice. And how fast it can act.

For example, we have collected environmental activists – 12 bodies, including Greenpeace and the Australian Conservation Foundation, plus the City of Sydney – declaring that “once one accepts the inevitability of decarbonization, the question becomes how to achieve it while maintaining high levels of reliability and affordability” and urging acceptance that “the NEM is in deep trouble” because of “the failure of the regulatory framework to internalize the environmental consequences of investment and operational decisions is central to the market’s failure to respond to extreme weather events in a way that supports decarbonization while also ensuring high levels of reliability and affordability.”

They want a national energy objective that “explicitly recognizes the energy trilemma.”

We have the Energy Policy Institute (EPIA) pointing out that it has been “saying for ages that there has been too much short-term thinking and false hope about system security.”

EPIA considers that “system security is very much a national long-term planning issue that cannot be dealt with by political solutions” and it urges the appointment of a “chief planner” to take over where the Finkel task force leaves off to guide the NEM for “at least 30 years into the future on an ongoing basis, paying close attention to the three imperatives of energy security, energy affordability and emissions reduction, whilst undertaking wide consultation with industry, consumers and other key stakeholders.”

In EPIA’s opinion, “there is no place for party politics or ideologies in the contest between technologies.” All network and generation options, both large- and small- scale, including smart grids, micro-grids, new and old renewables, storage systems, low-emissions coal and gas, CCS, nuclear power and fuel cells, should compete with each other. In particular,

EPIA says that domestic barriers to the supply of natural gas should be lowered and the ban on nuclear power should be lifted.

And today the Australian Energy Market Commission has delivered a magisterial rebuke to politicians collectively in its submission to the task force, declaring that “the Australian energy sector has suffered from a long vacuum around national, co-ordinated policy decisions.”

This, says AEMC chairman John Pierce, has resulted in “pervasive uncertainty which makes it difficult for business and consumers to invest – and undermines the reliability of power supply.”

The commission adds that “without clear, national, co-ordinated policy objectives and credible mechanisms that reinforce one another both business and consumers find it difficult to invest – which undermines the reliability of supply.”

Overall, it says, given rapid changes in technology and consumer behaviour, it is important for national energy policy to be clear and acted upon consistently – and the “time-critical nature of energy market reform means it is imperative that development is not frustrated” through the CoAG Energy Council by “duplicative, time-consuming processes and delayed decisions.”

Given that the original design of the UK power market was the template to a considerable extent for the NEM, it is notable that the AEMC now cites the more recent British experience as a “cautionary tale” showing how incompatible mechanisms targeted at emissions reduction and energy objectives now threaten reliability and increased prices.

In the context of all this, I have been struck by a commentary on responsibility for energy security included in EnergyQuarterly, published by Graeme Bethune’s EnergyQuest consultancy.

Bethune opines in the new edition that “if the electricity market is national (or at least covers the five eastern States), surely energy security is the responsibility of the federal government.”

He adds: “While the NEM operates under national laws and is operated by bodies with Commonwealth-appointed directors and management, (it) is actually a patchwork of State-based generation and distribution assets that are beholden to State legislation.”

Bethune says “the toxic state” of national politics means there has been no consistent over-arching policy for the NEM for most of the past decade and “therefore very little investment in new generation or even the upkeep of existing assets.”

Most of this part of the EnergyQuarterly commentary is directed to the South Australian situation, but its underscoring of the state of new capital development of power plant and the maintenance of existing generation is something that the Finkel task force needs to have at top of mind — and its view that the federal government ultimately has the responsibility for sorting out this mess is a point likely to resonate with the community at large.

John Bradley, CEO of Energy Networks Australia, has put out a statement highlighting the fact that there is “a groundswell of support for a carbon policy circuit breaker.”

Bradley says there is “an overwhelming consensus of stakeholders supporting market-based carbon policy” and argues that “the energy industry, unions, social welfare bodies, environmental advocates and, most importantly, customers are ready to work with governments to resolve the impasse.”

He asserts that the goal should be a “pragmatic agreement on market-based carbon policies which are technology neutral.”

The frustration that I think is going to grow even more strongly in the community than it has to date will come when all the above is taken in to account and the realisation dawns that  we still have many months to go while the Finkel task force wends its way to a conclusion and the federal government produces it climate policy review (and meanwhile the Punch and Judy show of federal politics careers on, seemingly on another plane to the world in which we have to live).

A very big issue for Malcolm Turnbull and his cabinet committee on energy is whether they and the Coalition government can afford to wait until some time late this year – or more likely early 2018 – before the impasse is addressed.

Problems in energy security in the winter ahead, and perhaps next summer, as well as the mutinous state of big business over energy prices (read “Manufacturers slugged by power price hikes” in yesterday’s Australian Financial Review) suggest to me that the federal government and the Labor party may not have the luxury of many more months to use the Finkel’s review as a shield.

The arrival of householders’ power bills for the summer just ended may soon turn out to be the next weapon for public cudgelling of politicians’ backs in the energy debate.

To quote both Shakespeare (“Henry V”) and Sherlock Holmes, “the game’s afoot” and, while the Finkel process is usefully throwing up the deep concerns of stakeholders over security and affordability of energy, the Prime Minister and premiers may be running out of time to reach the consensus being urged on them faster than they imagine today (or at least are prepared to acknowledge publicly).

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