Onward (and hopefully upwards)

The speed with which two key business associations put out statements on the CoAG Energy Council deliberation of the “national energy guarantee” today is testament to both relief that the encounter didn’t end in a car crash and concerns that the destination be reached as soon as possible.

In part, I suspect, this is influenced by industry’s fears that the Energy Security Board’s Kerry Schott is right when she points out that foot-dragging on this issue could see decisions ending up being pushed out beyond next year’s federal election (which must be held by May).

As is widely publicized in the media today, next steps after this morning’s discussion are the Coalition party room review and then a telephone hook-up of energy ministers next Tuesday.

It is worth noting from the CoAG communiqué published this afternoon that, at the request of South Australia, the Energy Council has collectively acknowledged “a reliability gap could emerge at any time” over the next 10 years – and has asked the ESB to suggest “legislative options” for addressing this.

While on the subject of the communiqué, it should not be overlooked that the other important business on a crowded agenda was consideration of the Australian Competition & Consumer Commission report on retail electricity pricing. Ministers “agreed to act quickly” by progressing an initial set of 16 cross-jurisdictional recommendations from the ACCC, including reducing the time it takes for consumers to switch retailers, ensuring they get the information they need before their contracts end and fast-tracking consideration of how to increase penalties for unacceptable retailer behavior as well as strengthening the commission’s investigative powers. The Energy Council also agreed to a program of work to consider another 23 recommendations from the ACCC.

As well, the Energy Council has agreed to devote part of its December meeting to further consideration of the Australian Energy Market Operator’s integrated system planning report and has given Kerry Schott and the ESB a lead role in progressing “an actionable strategic plan” on transmission planning and interconnection augmentation.

This is all important stuff but the immediate focus of industry – suppliers and large users – is on next steps for the NEG. The Energy Users of Australia Association has shot out a reaction to the meeting that, in effect, says “so far so good but do get on with the job.”

EUAA chief executive Andrew Richards says “this policy has been circling the airport for too long – it’s time to land the NEG” in the interests of maintaining grid reliability, delivering lower end-user costs and progressively pursuing emissions abatement.

The EUAA points out that AEMO actions to ensure adequate supply last summer have come home to roost for its members (who pay billions in energy charges annually) in the shape of “substantial bills” to pay the costs involved. Failure to land the NEG, the association warns, will leave the maintenance of system reliability being managed by AEMO and State governments via further costly market interventions.

This morning’s CoAG meeting, of course, is being followed this afternoon with a deluge of media coverage seeking to highlight the ongoing political biff – and the weekend will see plenty more, encapsulated by Channel Nine’s assertion that the policy “must still stagger through a minefield that could blow it apart.”

While claiming a “victory” today (as he has) might be going a bit far, Josh Frydenberg is entitled to feel he and the federal government have passed in fair shape through this NEG gate; what some of his own backbench colleagues may do next week before Malcolm Turnbull can massage a party room decision fit for purpose is the next challenge.

The Liberals are themselves not above playing political hardball whiles simultaneously trying to hold the high ground – Frydenberg is out and about this afternoon charging that the Greens are “wagging the tail of the Labor Party” in Victoria ahead of the November State election, declaring the Andrews government is “no longer in charge” and warning that, if it trips up the NEG, “the people of Victoria (are) guaranteed higher power prices and an increased risk of blackouts.”

It was interesting to read an op-ed by the Grattan Institute’s Tony Wood in the Australian Financial Review ahead of today’s meeting – in which he decried accusations that the NEG is “enormously complex.”  It is, he asserted, in fact “alarmingly simple.”

Wood argues that the measure, in essence, requires retailers to deliver “increasingly clean” energy to consumers and to ensure they have enough contracted capacity to meet demand. Design limitations, such as the potential impact on NEM competition, he claims, can be addressed during the implementation phase.

He supports pressure being applied to the Turnbull government to increase the abatement target, but declares, the guarantee should be green-lighted because it can deliver lower end-user prices through higher energy investor confidence, including development of new coal-fired plants if they are commercially viable.

“There are those from the extremes of both sides of this debate who have concluded that the guarantee would be worse than doing nothing. They are wrong,” he adds. “The danger is that our political warriors will beat each other to a standstill with no clear victor and no clear policy. If that happens, the big losers will be Australian energy consumers and the environment.”

Of course, there are a multitude of devils in the NEG detail, but, broadly speaking, I think Wood hits the nail on the head – as he also does when counselling the politicians to leave the debate on enhanced carbon abatement to the upcoming federal election.

The last word at the close of an interesting day belongs with EnergyAustralia CEO Catherine Tanna (in an op-ed just published on the Financial Review website).

The NEG, she writes, is a mechanism designed to give east coast society more reliable and cleaner energy. The process it proposes can be endorsed now – and the ambition left to another day. She’s disappointed the NEG was “kicked down the road” today.

And she asserts that the NEM does not have a power capacity problem. “There’s more than enough installed, nameplate generation – it’s just not where it needs to be or not always available when it’s needed. Everybody deserves affordable, reliable and cleaner power. That’s what the NEG will deliver.”

If I was Frydenberg, I’d be making sure that the Coalition party room members read Wood and Tanna over the weekend – rather than continuing to be distracted by (or contributing to) the Punch & Judy show on offer in the popular media.

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