Round & round the carousel goes

Technically, I guess the Prime Minister is right. He reportedly differs strongly with Kerry Schott, chair of the Energy Security Board, over whether energy planning has descended in to “anarchy.”

Scott Morrison has told a radio station “I don’t agree with that at all. I think it is rubbish.”

Now the definition of anarchy is “a state of disorder due to absence or non-recognition of authority or other controlling systems” and, on this basis, Morrison is correct. But, when you consider that synonyms for anarchy include disorder, disorganization, chaos, tumult and pandemonium, it may be that Schott has a point.

Morrison insists the federal government is still engaged in pursuing a NEM reliability guarantee with the market’s other governments – which is true; the next discussion is scheduled for late this month. Energy Minister Angus Taylor says NEM governments will be asked on 26 October to have a market reliability obligation in place by the end of 2018.

Morrison also rejects the idea that “anarchy” could be applied to his government’s emissions abatement plan – which is also true; there is a lot of noise about Australia pursuing a larger target but one certainly exists.

Schott, on the other hand, is entitled to be angry, as she says she is, that the Liberals’ inability to manage themselves has undermined a year’s careful work on the “national energy guarantee” which included wide-ranging consultation and a series of CoAG Energy Council meetings. (Schott will be participating in this month’s CoAG meeting.)

Quibbling about the use of a word really isn’t the point. As EnergyAustralia’s Catherine Tanna said this week, we have now had “years of policy paralysis interspersed with intense bursts of market intervention.” She rightly argues that the stakes (for consumers and the economy) are too high for these political games.

And Origin Energy’s Frank Calabria says that investors have had to cope not just with years of an absence of policy certainty but also an absence of policy consistency. Whatever you choose to label this situation, acceptable it certainly isn’t.

The Australian Financial Review, in an editorial set against the background of its conference on energy, avers that “everybody has some energy policy explaining to do.” I am inclined to the view that we have heard more than enough noise masquerading as explaining in the first nine months of this year – what we need right now is the federal government and the CoAG members collectively to settle on key policy and regulatory steps.

That said, it also needs to be accepted that we are going to have to wait on the next federal election to deliver an administration able to pursue an abatement approach investors will (or will try to) regard as settled rather than (to quote the Financial Review) just “piling more half-baked interventions on top of the others.”

And this is not only about generation, despite the fact that most of the debate focuses there.

Andrew Dillon, the Energy Networks Australia CEO, told the Financial Review conference: “we can’t sit around and wait for carbon and energy policy to be integrated on the generation side before we turn our attention to transmission: we will simply be too slow and that will cause significant upheaval.” To which I’d add that, without expert advice on total system costs, decisions made on new infrastructure (whether pushing for more variable renewable generation or for investment in fossil-fuelled plant or to continue banning the use of nuclear) in the present environment all bear the risk of unintended consequences in terms of consumer bills.

The ignorance constantly being displayed – eg Morrison opining that nuclear power costs too much or Shorten claiming that lots more wind and solar will push down prices – flows from a wilful avoidance of advice about the importance and urgency of seeking total system cost estimates almost four years after a royal commissioner (Kevin Scarce) told us that they were a crucial part of future power market planning.

(This week the Financial Review pointed an editorial finger at Labor spokesman Mark Butler, who, it said, could not convincingly explain how an already-stressed network could deal with Labor’s extra emissions requirement while also reducing prices.)

If there is one lesson to be learned from the NEM experience since the South Australian debacle delivered a wake-up call in September three years ago, it is that energy supply should not be an ideological plaything – but who, apart from some of the political players when it suits them, can argue this learning is now an inherent part of our national approach to this sector?

Apparently, business leaders are now sufficiently teed off about the situation that, via the Business Council of Australia’s energy and climate committee, they are examining creation of a self-regulating system to reduce greenhouse gas emissions, restore energy reliability and improve the environment for investors.

This has drawn a retort from federal Resources Minister Matt Canavan – who was asked from the floor of the Financial Reviewconference if the BCA move “will shame the government in to action” – that business heads need to exercise humility. Consensus, claims Canavan, is not a guarantee of correctness.

And he adds: “We have a way of resolving fraught political dispute in Australia – it’s called democracy and I don’t think the corporate sector is a replacement for democracy. I don’t think some kind of corporatocracy or technocracy is a better outcome than democracy.”

Neither do I, minister, but how can you claim that “democracy” as it has been practised at the federal level since 2010 is delivering a “clear, co-ordinated, consistent signal” – which is what Shell’s Zoe Yujnovich says energy investors have to have?

Needless to say, Labor’s Butler (representing a party that trampled on energy-intensive industry interests in 2010-11) has leapt on Canavan’s comments, which he describes as “unhinged.”

Round and round the carousel goes; where (and when) it will stop nobody knows.

PS: A week such as this would not be complete without the Greens hurling themselves towards the headlines, this time in the shape of MP Adam Bandt, who told the AFR conference that, if his party found itself in a governing coalition in Victoria after next month’s State election, a not-impossible outlook, it would push for closure of the Latrobe Valley brown coal generators as part of any political deal. This drew an editorial rebuke from the Financial Review that “for the past decade, the Greens have terrorized attempts by Australia’s political system to come up with a stable, market-based policy framework that would reduce carbon emissions, maintain the reliability of power supplies and keep a lid on energy costs.”  In the 2014 Victorian election, the Greens picked up 385,240 votes (11.48 per cent of the primary poll) versus 1.27 million for Labor (38.1 per cent) and 1.4 million for the Liberals and Nationals (42 per cent). It was preference votes that carried the Andrew government in to office without needing to be in a coalition. What will 24 November bring? And what would a Greens/Labor government in Victoria mean for the management of the NEM?

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