In all directions

“Be prepared” is not only a motto for the Scouts – and stakeholders in energy supply clearly are embracing it at the moment.

It is being reported, for example, that both electricity and gas companies are sounding out law firms on support should either the Coalition or Labor dial up a royal commission in the months ahead. This is sensible because, from where I am sitting, the chances are about 50:50 of this occurring, with the added rub that, under Labor, sooled on by the union movement, the issue of privatization could be on the agenda. As the banks have found, the reputational risk for companies exposed to such a commission are not trivial.

Meanwhile, it is also reported that the business community and Labor (in the form of Bill Shorten and energy spokesman Mark Butler) have held a meeting at Parliament House, Canberra, to discuss, among other things, pursuit of the “national energy guarantee” – with Butler assuring them the Opposition wants to make sure that “the good thinking (on the NEG) is not entirely lost.”

It won’t be lost on the energy sector that the outcome of the Wentworth by-election is crucial to how the next act of the present political drama plays out; a poor showing in Malcolm Turnbull’s former seat would make life still more difficult for Scott Morrison & Co – and a defeat would put the government on life support.

While all this is going on, new Energy Minister Angus Taylor and his advisers are said (in the media) to be working on a proposal to support upgrading of existing coal-fired power stations to “improve performance, cut emissions and prolong operating lives,” an approach claimed to have been initiated by his predecessor, Josh Frydenberg, now Treasurer, who would have to find the funds for any form of financial contribution.

Taylor’s current theme, set out in an op-ed he has written, is “lower (power) prices while keeping the lights on.”  The Morrison government, he promises, “will not be driven by ideology or grand gestures but by pragmatism.”

To which he adds: “We will not hesitate to intervene to stop price-gouging. We will strengthen the powers of regulators to tackle dodgy practices – and continue to crack down on rampant over-investment in distribution and transmission.”

He also asserts that “the Victorian grid will be stretched to the limit this summer.” And I can’t see a tweet from Premier Daniel Andrews (who is ever so busy on social media) rejecting this notion.

In this context, the Australian Energy Council, representing gentailers, has just published a commentary sniping at the Australian Energy Market Operator over its “surprising” and “substantial” shift from previous outlooks to warn of a deterioration in 2018-19 in Victorian supply prospects. Without publishing the basis for its analysis, AEC says, AEMO is assuming that thermal generators’ performance is declining, “presumably due to age.”

And the lobby group grumps: “AEMO is currently seeking to progress a number of controversial proposals in the reliability area whose prospects are improved if stakeholders have a heightened perception of reliability risk.”

Whatever, the Coalition government is clearly back again to arguing that reliability needs equal weight with cost in cobbling together its next iteration of policy after a fortnight or so of arguing that, like Coles, its big focus is on pushing prices “down, down.”

If you want an un-edited version of Taylor’s thinking, you should go on to his departmental website and read the transcript of his Sky TV interview with Chris Kenny last weekend. It includes this:

“The one piece of the NEG that we are hanging on to ……. is the reliability guarantee. And this is saying if you are going to put in this intermittent generation, then you have to pay for it. You have to make sure that the system can actually deliver and it is the piece of the NEG that is critical to continue with. The NEG itself is gone, but we are hanging on the reliability guarantee because that will force the States to ensure that they do provide baseload power and, if they don’t, they’re going to pay the price.”

There’s also a cautionary comment for politicians up on Energy Networks Australia’s website this week: “Much of the post-NEG public discourse has focused on the lack of policy certainty in the energy sector over the past decade. This has time and again created headaches for networks and generators – who are required to build and maintain critical national infrastructure over decades, not three or four year cycles. Put crudely, networks and other parts of the industry have frequently been victim of policy made with short-term political cycles in mind rather than the long term interests in consumers. All too often, kneejerk decisions about how we invest have ultimately led to long-term pain for energy users.”

All true, but it is hard to see in the present environment (including the Victorian election in November) how business can hope to have politicians dismount from their cycles. Rather, they are in the fictional Lord Ronald mode – he who “flung himself from the room, flung himself upon his horse and rode madly off in all directions.”

PS: On the topic of Victoria’s power supply, the latest quarterly data (sourced from Graeme Bethune’s EnergyQuarterlyshow that, comparing April to June 2018 with the same months in 2017, there was a strong consistency in the contribution of brown coal generation: 9,505 gigawatt hours versus 9,493 GWh in 2017.

For other sources, gas dipped (down to 620 GWh from 1,010 GWh), hydro rose (937 GWh versus 762 GWh) and the wind contribution pushed up to 949 GWh after being at 622 GWh in 2017 quarter. The State’s rooftop solar PV was estimated at 246 GWh (218 GWh the previous quarter).

 The interconnector flows from the State to New South Wales were 336 GWh (minus 78 GWh in the previous quarter), to South Australia down to 334 GWh (496 GWh) and to Tasmania were 147  GWh after being 280 GWh in the other direction last year.

 Leaving aside rooftop electrons, the coal plants held 79 per cent of Victorian in-State generation in the June 2018 quarter.

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