The wheel turns

Josh Frydenberg would be less than human if he did not permit himself a quiet chuckle at the failure of the garage warrior, Jay Weatherill, to win re-election in South Australia yesterday.

At a far more serious level, Frydenberg and Malcolm Turnbull will now be seeing a better prospect for the “national energy guarantee” to be advanced this year because South Australia is the lead State in the legislative process for the NEM and because Weatherill (to quote The Guardian newspaper) was “an implacable, one-man road block to the NEG on the basis that the scheme is not sufficiently friendly to renewables.”

At the same time the failure of the much-hyped Nick Xenephon thrust to be the big influence in the next State parliament will bring some relief to energy retailers, who would not have been looking forward to the wider implications of his populist plan to create the “Community Electricity Trust of SA” to provide electricity to households with an income below $75,000 a year and to small businesses. (Even so, the issue of gentailer market power in the NEM, and not least in South Australia, is not going to go away.)

More broadly, last night threw a bucket of water over the Greens, who were hoping for a boost for their radical policies from the by-election in the federal seat of Batman in Melbourne. The Greens also picked up just 6.6 per cent of the primary vote in South Australia on Saturday, well down on the previous election and half of what Xenephon’s SA Best garnered at its first showing. Victory in Batman would have given the Greens a new launching pad to promote their energy spiel and, inevitably, would have seen federal Labor under Bill Shorten trying again to play catch-up.

It will be a mistake to see the SA poll outcome as being all about energy – Reuters, for example, in its report today asserts the result is “a blow to national renewable energy plans” and bizarrely “the vote was seen as a choice between solar and wind energy, pushed by Labor, and coal, backed by Turnbull’s conservative government” — although the issue obviously played a prominent role in the election campaign.

Perhaps the most significant influence of all on the outcome is that the Electoral Commission’s reworking of State seat boundaries required Weatherill and Labor to win seats to hold office – and that was always a bridge too far, given the baggage he and his government were carrying. Steven Marshall led the Liberals in 2014 to victory in the popular vote but couldn’t muster enough seats to take office.

It seems Marshall and the Liberals will have a clear majority in the new parliament, enabling them, depending on the outcome in the State’s upper house, to wield their new broom rather than just wave it.

Whatever this means for policies within the State, the big national implication of the poll result is that Frydenberg and Turnbull now have a better opportunity to use the rest of this year to advance the NEG in an environment where there is some chance that the wildly unpopular upward trend in energy prices in eastern Australia will be depressed and just possibly reversed.

From an industry perspective, the bugger factor remains that this is still likely to be a work in progress at the time of the next federal election (which realistically needs to be before May next year) and Shorten frequently gives the impression on this issue of being Weatherill writ large. There can be no investor confidence about a NEM built around a NEG until the federal poll is out of the way.

Meanwhile,to counter the green boosters, who can be relied on to describe the SA election outcome as a version of the invasion of the Daleks for renewables, it is worth recording what the incoming Liberal government actually said during the campaign: “The State Liberals fully support renewable energy, but there must be a sensible transition to renewable sources which does not compromise the integrity of the grid and leave South Australians vulnerable to blackouts and massive prices.”

The SA Liberals have a three-cornered energy plan: to achieve greater security of supply for the State, to lower its power bills and to be part of the push to meet a national renewable energy target.

Marshall declared: “Our energy policy will be practical, not ideological.” He added: “A Liberal government’s discussions with the energy supply industry will not have a bias towards any particular technology. All options must be on the table if we are to resolve the current crisis in reliability and affordability of electricity supply.”

High on the list of a Marshall government’s desires is a new high voltage transmission line linking SA and New South Wales – which would allow the former to better export its excess wind generation and to rely on access to black coal generation when there is a lack of wind.

Nonetheless, the practicalities of politics in a State with a community that likes renewable energy (despite their fortunes in the past having been built to a not inconsiderable extent on Cooper Basin gas) dictated a Liberal election promise to subsidize battery installation in 40,000 homes and provision of a $50 million fund towards the development of new storage technologies. (Why a small State in Australia wants to throw money at storage R,R&D given what is going on in the world to drive this technology beats me, but that’s politics.)

Now that this election’s done and dusted (more or less, counting continues), attention will turn to the 20 April meeting of the CoAG Energy Council in Melbourne, with Energy Security Board chair Kerry Schott telling a forum last week “I really do believe the worst is over on the (electricity) price front.”

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