Reacting to Finkel

We have the report. The issue is “now what?”

And the answer is that we must wait on two more discussions.

The important first step is that the Council of Australian Governments has given the hurry-up to energy ministers to advise on a response to Finkel’s task force recommendations.

CoAG Energy Council, the communiqué from Friday’s leaders’ meeting says, must “provide urgent advice out of session” and no later than August on which Finkel findings can be implemented – and on the timeline for doing so.

In process terms, this is to be expected and the tight deadline for this advice is to be welcomed, but it means that we will wait until some point beyond August (perhaps December) to find out whether or not our governments can genuinely work with each other on this critical issue.

This also won’t satisfy those who see the Energy Council itself and its bureaucratic set-up as a core part of the problem.

The scale of the problems to be addressed has been encapsulated by a comment from the lobbyist Australian Energy Council, representing power generators and energy retailers. CEO Matthew Warren has told the ABC: “Right now (in terms of policymaking) we couldn’t do worse if we tried. We’re making everything worse.”

Some argue that a root cause for this is the way Australia goes about energy market oversight.

The Finkel recommendation for establishment of an Energy Security Board particularly resonates with those, like the Energy Policy Institute of Australia, who are calling for a throwing off of the “chains of ‘co-operative’ energy governance.”

In a submission to the task force, one of 390 it received, EPIA in March declared “the COAG Energy Council and its (bureaucracy) has no accountability to anyone except itself, its decision-making is excessively political (hard of course to eliminate where its representatives change every time one of the constituent governments change) and it has no permanent secretariat or dedicated resources of its own.” The institute urges acceptance that the council and its apparatus is “a cumbersome, sub-optimal and outdated model that is no longer fit for purpose: it is too slow, it has too many part-time masters, it has too many part-time servants and its structure and modus operandi both need streamlining.”

Finkel and his task force agree that the issue of stronger energy market governance is a high order of business for the nine governments. The report’s executive summary highlights the need for a “strategic energy plan” – with an ESB to drive implementation, including whole-of-system monitoring of security, reliability and planning – along with faster rule change processes, a better funded regulator with enhanced market surveillance capabilities and a NEM operator with a broad planning role.

Matthew Warren asserts that the Finkel report can make a fundamental difference by taking politics out of the debate of electricity and emissions. Unfortunately, this may not be what actually happens.

Labor are already playing the coal card as a tactic to wedge the Turnbull government – as are the most conservative in the Coalition’s own ranks although the Grattan Institute’s Tony Wood argues that “the Finkel blueprint can be supported by Coalition government members concerned about high costs, energy security or the future of coal.”

Some reaction, of course, is entirely predictable – like that from the Australian Greens, Richard Di Natale and Adam Bandt declaring the report “a political fix that will keep coal and gas burning for another 50 years.”

Others in politics are leaning towards positive – like Queensland Premier Annastacia Palaszczuk, who notes that, with “the southern States” (who include Labor’s Victorian government) refusing to utilize their own gas resources, her administration can and will step up. While talking up her own “Queensland powering plan,” she also notes that Finkel’s clean energy target (CET) “appears to provide one option to navigate the present impasse.”

Energy Networks Australia tells us that Finkel’s report is “the last, best hope” for customers wanting the energy system stabilized to deliver reliable, affordable supply. “A transforming energy system,” says CEO John Bradley, “needs strong, well-resourced and pro-active market institutions with a shared plan of action and accountability for clear milestones.”

This ambition hangs in no small part on a bipartisan agreement to deliver the CET. This is especially the case with east coast gas supply. As Bradley says, “Australia can’t address electricity system security without removing arbitrary blockages to gas supply and ensuring gas markets are working effectively.”

Naturally, the upstream petroleum is also striking this note. Malcolm Roberts, CEO of the Australian Petroleum Production & Exploration Association, says a CET that works must be “realistically ambitious” – “set at a level that winds back dependence on coal-fired generation without jeopardizing security.” The best option, he asserts, is to use more gas-fired power – at present, he adds, “we are seeing gas generation squeezed out by a mix of cheap coal and subsidized renewables.”

The Finkel report, although I don’t see media so far running this line, is unequivocal in speaking up for a role for gas: “Access to a reliable and affordable gas supply is in the interest of all Australians for its direct use for heating, as a feedstock chemical for industrial processes and as a fuel for electricity generation in the NEM, providing a reliable, low-emissions substitute for ageing coal-fired generation and essential security services to complement variable renewable electricity.”

Meanwhile, the Minerals Council of Australia, while cheering Finkel for supporting a technology neutral approach to energy markets (“a welcome shift from policy settings that have exclusively favored intermittent sources with adverse consequences for reliability and price”), is unhappy that the task force “implies that high efficiency, low emissions coal generation is not low emissions or clean energy.” If countries around the world, asks MCA, are embracing HELE, pointing to more than 1,200 such projects it says are building or planned in East Asia alone, why should Australia discourage the technology? “It is a simple matter of economics and engineering that an energy mix not including new, super-efficient baseload coal generation will be more costly and less reliable.”

The mining lobby is also “disappointed” that the task force report has not recommended the lifting of our local ban on nuclear power, “a technology currently providing zero-emissions baseload energy to countries with a combined population of 4.5 billion.”

As for the Clean Energy Council, the main lobby group for wind and solar investors, while welcoming the report, it is concerned that imposition of additional standards on new renewable energy projects to support energy security could end up being “punitive measures that stifle innovation and unnecessarily drive up costs.”

At the end of the line, of course, are consumers – and Energy Consumers Australia CEO, Rosemary Sinclair, urges a “laser-like focus” on their interests, saying that households and small businesses want to be able to make the most of new opportunities (eg solar and storage) while also being guaranteed that energy will remain reliable and affordable for everyone.

Politicians, not being stupid even if many of them play games that invite the epithet, realize that delivering the whole package ECA demands is a very tall order, especially when they are also trying to woo votes from those with green leanings.

Turnbull and his fellow leaders, in duck-shoving the next moves down to the CoAG Energy Council without giving any over-arching reaction to Finkel (apart from “re-affirming (our) commitment to ensuring energy security and affordability,” to quote the communiqué) are being pragmatic.

It’s what the leaders do after they get the feedback in August that is critical. If their response turns out to be yet another fudge, or subsequently to be undermined by a new battle royal over the climate change policy also now being refined, then things might indeed get worse than they already are.

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