Can the caravan move on?

It is not hard, really, to carp about aspects of the Finkel report – Tony Abbott has won media gratitude by christening it a “magic pudding” as well as using it to resurrect the “carbon wars” – but the critical issue now, as it was before the document was published, is how the body politic’s leadership can efficiently address the main challenges it throws up in a time frame dictated by electoral cycles?

There was always going to be a dichotomy between what politicians seek – in this case, a circuit breaker for an electorate deeply unhappy about energy prices, somewhat scared about security of supply and split over how far Australia needs to go in pursuing emissions abatement in the here and now – and what someone like Australia’s chief scientist will want to set as a light on the hill for long-term policymaking.

In the immediate aftermath of the “blueprint’s” release, it is clear that the media want to focus on a three-way stoush between federal politicians (the Turnbull government, its recalcitrant right wing and the Labor opposition, perhaps emboldened by what it has seen happen in the UK) over a price on carbon.

The Turnbull cabinet wants to focus on power pricing and security of supply while fending off abatement demands until it can complete its climate change policy review sometime later this year.

Others have their own agendas but denizens of political backrooms, Coalition and Labor, will not have missed Rosemary Sinclair of Energy Consumers Australia saying in the ABC’s “Q&A” discussion on Monday that “the community wants this matter settled”.  She added: “We want to be able to rebuild confidence in this market, we want long-term policy settings and we want costs brought under control and reliability and security stabilized so that we don’t have to worry about these things anymore.”

As well, there’s a recent Essential Report poll (just before the Finkel report was released) that has 28 per cent of respondents saying the top energy policy priority is keeping prices down, 21 per cent saying its reducing emissions, 19 per cent opting for maintaining reliability — and 21 per cent saying prioritize them all. (Also, 12 per cent responded “don’t know”……….)

Meanwhile the Minerals Council of Australia, for one, has opted to challenge the Finkel report on its central theme of a technology neutral approach, not unreasonably accusing it of “studiously ignoring” nuclear energy and pushing in particular for a regime in which coal-fired high efficiency, low emissions generation is given an opportunity for development.

The MCA point that resonates with me is the assertion that “the best, most affordable and reliable energy mix (for eastern Australia) is a balanced one with contributions from gas, renewables, new HELE coal and later from carbon capture and storage as well as (eventually) nuclear.”

How we frame a regime that enables this comprises two sides of a triangle; for today’s politicians, the hotter and harder to handle side may turn out to be the affordability one.

It was notable, I think, that Alan Finkel, appearing on that ABC “Q&A” program, sought to slip in the point that his task force’s focus is on “the lowest prices that can be achieved” not on a return to the much lower bills of the past.

Will this pass the “pub test”?

Josh Frydenberg, on the same program, made sure of throwing in the role of energy network costs in this equation, well aware that the CoAG Energy Council he chairs has the need to resolve network regulation issues high on its “to do” list.

It is going to be more than interesting to see how Finkel, Frydenberg and Labor’s Mark Butler present and refine their views at next week’s “Australian Energy Week” conference in Melbourne. Finkel will come to it on 22 June after making an important presentation at the National Press Club in Canberra the previous day – and Frydenberg and Butler will appear in the “Energy Policy Forum” of the “Energy Week” program on 23 June (with your’s truly in the chair).

One of the points Finkel made on “Q&A” goes to the widest issue with which the Coalition and Labor (in their federal and State guises) need to grapple but which passes over the heads of most of the community. “The existing market, based on purely trading in energy, is no longer effective in sending investment signals to the people who will be building new generation.”

We keep being told (correctly) that the biggest problem for generation investors is uncertainty – and could there be anything more uncertain than the thought that the path on which Finkel is leading the politicians is one where, as in Britain (co-pioneer of the competitive power market along with the NEM and the “PJM” in America), state intrusion becomes a primary driver?

The other theme I see emerging in the public debate following the Finkel review’s publication is the gulf between those, like the Greens, who insist wrestling with global warming is the most important issue, and those (including the task force and certainly the federal government) who see affordability and security of NEM supply as paramount.

Perhaps one should be more specific here: while the impetus for the task force exercise was the supply catastrophe in South Australia, that State is a sideshow in the NEM – the vast bulk of consumption and supply is in three States, Victoria, New South Wales and Queensland with two of them (Victoria, NSW) now having growing question marks over their ability to meet all demand all the time, perhaps as soon as next summer.

Having a SA-style situation in Victoria or NSW (or both), or even the public perception that this could happen, is a political bridge too far for the Coalition and Labor (at both State and federal government levels).

It’s worth noting in this context that the CoAG leaders underlined in their communiqué after last week’s meeting that they “reaffirm (their) commitment to maintain energy security and affordability.”  That’s four Labor State leaders and two Coalition State premiers as well as Turnbull speaking – including the Victorian Labor and NSW Coalition governments.

Churchill was fond of quoting the alleged Arab saying that “the dogs bark and the caravan moves on” and we can be sure of lots more barking around this caravan, but, for political leaders, there is also the certainty that they need to come to two destinations in the near future: first the CoAG Energy Council discussion of the Finkel report and then the next CoAG leaders’ meeting.

Thereafter we will be back in the electoral cycle battlegrounds ahead of polls in Queensland, Victoria, Tasmania, New South Wales, South Australia and federally in 2018 and early 2019.

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