Press the reset button

You need to go to page 35 to read the condemnation.

There (in a 212-page document) the Finkel task force states: “Australia is behind other countries in developing a clear, national strategy to ensure that our electricity and gas sectors operate and transition effectively and efficiently.”

The opportunity to get this right was clear in 2007-08, when the Rudd-led Labor Party overcame John Howard’s Coalition. It’s been downhill all the way from there. And it rolls on now, as the review rolls out, with the media leaping on the politics of the “clean energy target” (the apparent Coalition choice). versus an emissions intensity scheme (embraced by Labor).

What much of the immediate media coverage does not take up is the serious nub of this whole matter.

What we have, the task force declares, is “a challenging investment environment in the NEM” created by “uncertainty related to emissions reduction policy and how the electricity sector will be expected to contribute to future emissions reduction efforts.”

The cure, as perceived by Finkel & Co, is “a long-term emissions reduction target for the electricity sector, a credible and enduring mechanism for the sector to achieve the emissions reduction trajectory and better management of generator closures.”

And, further, “new standards will also be required to give greater confidence that reliability will be maintained as technological developments continue to affect the system” with new variable renewable generators needing to contribute to regional reliability by ensuring dispatchable capacity is brought forward to the market.”

A long-term, integrated grid plan, the task force says, is required to establish “an optimal transmission network design” to enable the connection of new renewable energy resources. “Coordination of generation and transmission investment so that networks connect the areas with the best renewable energy resources, at an efficient scale, will be a critical challenge.”

When all the singing and dancing in done over the report, perhaps its most important recommendation needing prompt policymaker attention is this: “A new Energy Security Board should drive implementation of the recommendations of this review.”

The CoAG Energy Council, Finkel urges, should “immediately” agree to establishment of the ESB to pursue a new strategic energy plan and this blueprint (devised by the council) should be in place by mid-2018.

The other critical task force requirement is this: “By mid-2018, COAG leaders should agree to a new Australian energy market agreement that recommits all parties to taking a nationally consistent approach to energy policy that recognises Australia’s commitment in Paris to reduce emissions and governments’ commitment to align efforts to meet this target with energy market frameworks.”

Shorn of all the surrounding noise, this is a huge ask for politicians who have spent a decade demonstrating their lack of capability in this space.

In the responses from around the stakeholder spectrum spinning out this afternoon, I like the Deloitte comment that the report “allows Australia to hit the reset button for energy security,” calling for “holistic, clear-headed planning.”

Deloitte adds that “What is important now is to allow the energy industry time to digest the report and its finer points and to fully understand the implications, opportunities and challenges it presents.”

True, but the bigger challenge, I suggest, is for the politicians sitting around the CoAG table to seize the moment and collectively agree to the Finkel proposals outlined above.

That’s the button that needs hitting and there is no logical reason why the body politic shouldn’t do as it is asked.

It takes the task force six pages to list all its recommendations and there are many that need “digesting,” as Deloitte has it, but the critical ones, the umbrella for all that follows, simply require Malcolm Turnbull, the premiers and the chief ministers to have the gumption to say “yes, let’s do that.” And Bill Shorten and federal Labor to follow up by saying “yes,” too.

Just this once, don’t dance the energy politics tarantella – just make a decision in the national interest.

Of course, the devil is in the detail of the “energy market agreement” for which Finkel is calling – and it will no doubt take all of 12 months to hammer this out – but agreeing to pursue it is the key.

And, once that is accepted, failure to achieve a good outcome leaves the politicians open to the ire of the community in the critical 2018-19 political year.

As the report says, “at present, there is no overarching strategic plan for addressing the (NEM) challenges and capturing the (transition) opportunities.” That is a national disgrace in which both mainstream political parties share and Finkel provides them with an opportunity to correct their egregious failings.

In the Catholic rite of confession, the critical issues are acknowledgement of failings and a firm purpose of amendment. That’s what’s needed here.

Governments, says the task force, need to “take decisive action to ensure that the transition to the future grid, whatever it looks like, is smooth and that the electricity system continues to serve the interests of all consumers.”

And it quotes approvingly an Engineers Australia point from its submission to the review process: “Transforming Australia’s electricity generation is not a matter of choosing just one technology over another. It is using a combination of existing and emerging technologies in a structural policy environment consistent with emissions reductions and meeting the demand for electricity while providing a stable environment for investors. A secure energy future will be reliant on these policy approaches being successfully deployed.”

There is a large, important, separate aspect to the task force review, the worrying prospects for insecurity of power supply next summer, and it deals with how to address this at length – rightly so.

This ball is in the CoAG Energy Council court (even if, as Jay Weatherill has found in South Australia, it is leaders who bear the blame when things go pearshaped).

The task force takes a lot of words to say that dealing with the summer challenge depends on the “number of measures” that have already been put in place – which it supports and says it is “confident” they are appropriate.

The caveat is provided, too: “However, it is not possible to prevent or mitigate all impacts from extreme weather events or major equipment failure. The impacts of such events may be reduced through summer preparedness measures, ongoing monitoring and innovative solutions.”

And, just to be more sure, the task force wants a third party review of the Australian Energy Market Operator’s short-term demand forecast techniques. That’s another step that can be implemented straight away.

A lot of the review deals with the medium to long-term future and prospects for technology. It’s interesting stuff, but it’s not today’s main game – what politicians think are supply winners is really not worth a pinch of (insert your choice of substance) and readers of this blog know my view of  today’s perceptions of the system in 2040 or 2050 (the equivalent of 1994 and 1984, going back from here).

Whatever, as Finkel himself is saying, “business as usual is not an option” – and nowhere is that more true than in governance of the NEM and the policy umbrella under which it operates.

Both CoAG and its Energy Council have the opportunity in coming days to demonstrate swiftly, in reacting to the task force report, that policymakers understand this and are aiming to do much, much better than they have to date.

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