Fishy business

The quote of the year so far in what has been the most interesting period in our energy policymaking since the 1990s comes today from The Australian commentator Henry Ergas: “If there is a lesson from Australian energy policy, it is that it is far easier to make fish soup out of an aquarium than vice-versa.” I’ll pay that!

The new big fish in our aquarium in the Turnbull government’s “national energy guarantee” device, devilishly clever or diabolical depending on the stance of the observer.

Filleted down to its bare bones, the NEG aims to impose a reliability obligation and an emissions reduction obligation on energy retailers. John Pierce, chairman of the Australian Energy Market Commission and one of the advisers on the policy, summed it up at a forum in Canberra yesterday as “the (market) business that can produce the lowest cost reliable supply that meets the emissions target wins.”

The verdict of the nation’s power suppliers (delivered by the Australian Energy Council’s Matthew Warren) is that NEG is “a considered attempt to address the issues of reliability, cost and emission reductions from energy.”

The politically-important rural lobby, the farmers and food processors in areas that are a minefield for the Coalition at federal and State levels, speaking via the National Farmers Federation, sees the move as “promising,” emphasizing that what the Bush wants is whatever will bring down power bills.

The manufacturing lobby (via the Australian Industry Group) sees the plan offering a “plausible” policy direction to create conditions for investment in new generation and in factories. The Minerals Council says it welcomes the Turnbull government’s “acceptance of advice from the Energy Security Board that technology-neutral policy signals are needed to drive investment in reliable and affordable power supplies.”

“Our” ABC, so often the mouthpiece for the Greens and green-leaning opinion, uses one of its “investigative reporters” to deliver a website commentary that (a) the government wants us to believe it will “deliver the trifecta: no blackouts, less carbon dioxide emissions and lower prices” and (b) “there is serious room for doubt, but who really knows?”  The broadcaster asserts: “It’s impossible to make a definitive judgement because the policy, made on the run with obvious haste, is so sketchy.”

Other green lobbyists and commentators see the NEG as seeking to replace the Finkel clean energy target proposal “with a dirty one,” as the latest ploy of those conniving to depress renewables investment at the expense of existing fossil fuel generation and as potentially bad news for rooftop solar PVs.

University of Queensland professor John Quiggin declares: “The most important thing to understand is that (the NEG) is designed not to produce a sustainable and reliable electricity supply system for the future, but to meet purely political (Coalition) objectives for the current term of parliament. Those objectives are to provide a point of policy difference with Labor, to meet the demands of the government’s backbench to provide support for coal-fired electricity and to be seen to be acting to hold power prices down.”

Former Liberal leader John Hewson, now an ANU professor and a serial critic of his old colleagues, comments that the NEG “may yet prove to have been clever politics by Turnbull, both within his government and against Shorten, but any sort of medium-term guarantee is unlikely to impress voters who will have to live with further increases in their electricity prices and face the insecurity of possible blackouts for at least the next few years – certainly before the next election.”

The official opposition, federal Labor, allowed its knees to jerk vigorously for a day or two and has now settled in to calling for modelling to validate the claimed reductions in power prices and energy-based carbon emissions.  (There has been much Labor mocking this week of the government claim of a saving of $115 a year in household power bills; I’m a little surprised the federal government has not responded by drawing attention to Julia Gillard’s 2012 promise of a $250 annual saving from her “big stick” approach to networks plus pursuing smart meters and reliability standards; you’ll remember how well that went………..)

Malcolm Turnbull, in a radio interview today, has put his finger squarely on the big “if” of his new policy. “Clearly,” he said, “ we need CoAG cooperation. It’s got to be a CoAG mechanism.” Yesterday, at a forum in Canberra, he was asked  “What happens if the States simply say no?” His reply: “Let’s focus on getting them to say yes. The Energy Security Board was established by the States and the Commonwealth – it is a COAG creation.” To which he later added as a challenge to federal Labor: “This is a real opportunity for Labor to say: ‘Well, we’ve always said we wanted to have a bipartisan approach. We (have) got the (NEG) recommendation from the board that was set up on the recommendation of Alan Finkel. It was established by COAG. Let’s take their advice’.”

Josh Frydenberg has now written to the State governments, whose energy ministers were left out of the loop as the Coalition formed the NEG approach with the ESB’s input (because obviously they would have played political games to stymie the announcement), inviting their input to the next steps, including modelling of impacts.

His opposite number in federal parliament, Labor’s Mark Butler, meanwhile is saying it doesn’t matter whether he opposes the policy at this point because a State veto (via CoAG) will negate the NEG. Some political reporters are adding that, with difficult elections looming in Queensland and South Australia, a stoush with Canberra over energy may just be what Labor premiers Palaszczuk and Weatherill need – but the Canberra Times, in an editorial, is talking about feelings among Labor’s federal frontbenchers that it will be “unconscionable to have more trench warfare (about energy policy) that could extend to the next election and beyond.” At this level, the paper claims, there is an urge to “get off the energy merry-go-round.”

(All this raises an interesting point: if baulked in CoAG by the Labor States, could the Turnbull government legislate federally to make the NEG law? The Energy Policy Institute suggested back in March that “the door is open” for a National Energy Commission to be introduced via federal legislation, dismissing the CoAG Energy Council as “cumbersome, outdated and sub-optimal” and calling for Australia to “throw off the chains” of co-operative energy governance.)

A CoAG meeting next month will be the first formal opportunity to put the issue of co-operative federalism on the NEG to the test. Clearly, there is lots of room for more fishy business in energy politics despite the heartfelt plea from the Canberra Times that “pragmatism, not ideology is needed.”  The paper adds: “What is on offer is far from perfect. That said, many believe it will create a framework that can be improved and tweaked in the years ahead. It is also the only alternative to a dysfunctional mess that is likely to be on offer in the forseeable future.”

Last word: The Prime Minister, speaking at an AiG function on Thursday made this observation (which I haven’t seen picked up in the media):”The NEG is not going to bring down the price of gas. The price of gas is determined, and I repeat it for those who doubt it, is determined by supply and demand – like the price of everything else.” Hardly a minnow in the electricity policy aquarium, this point.

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