‘It’s not a simple choice’

As we move in to the last days of 2017, the federal government, via the publication of its climate change policy paper, has summed up the electricity supply challenge just at the point when early summer heatwaves have been testing southern State supply resilience.

Simultaneously and coincidentally, I guess, the Energy Security Board has put out a paper that underscores the fragile state of things.

The ESB’s “health of the NEM” diagnosis is that the market is unwell but hopefully on the mend. The three worrying symptoms, it finds, are

▪ electricity bills are not affordable

▪ reliability risks in the system are increasing; and

▪ future carbon emissions policy is uncertain.

To manage a recovery, says the board, “we need governance that is fit for purpose.”

In the policy paper released yesterday, the government says: “Australia’s energy market is undergoing the largest transition since the creation of the NEM. The same transition is happening across the world, driven by retirement of ageing thermal generation, flattening demand for electricity and rapid growth in renewable energy resources. The costs of intermittent generation from wind and solar, once prohibitively expensive, have plummeted in the past decade. At the same time, electricity prices for households, business and industry have increased, and investment has dried up for the kind of dispatchable generation needed to stabilise the grid, such as ready-to-use sources like coal, gas, pumped hydro and batteries. The government’s priority is to deliver a more affordable, more reliable and cleaner electricity supply for all Australians.”

Public sentiment on this, as I indicated in my previous post, using the latest Essential Report poll, is that about one in five of us believes all three goals should be given the policymaking priority and 15 per cent think it should be abatement of emissions. More than a third want energy costs to be the priority and 18 per cent say it should be supply reliability.

In the new paper, the federal government asserts that the “national energy guarantee,” which it and the eight State and Territory governments will again debate at CoAG Energy Council in April, will:

  • incentivize the right investment in the right place at the right time
  • lower wholesale prices and reduce spot price volatility
  • improve reliability, and
  • reduce emissions at lowest cost.

It adds that its policy will level the playing field and be technology neutral. “It will provide an incentive for every single technology to perform within the two constraints of meeting international commitments and maintaining reliability.”

For those in the community wanting cheaper power and hanging out for large cuts in their bills, it would be as well to understand the fine print of the government promise: “Modelling estimates that the (policy) will result in wholesale electricity prices beingan average of 23 per cent lower than without the guarantee over the period 2020 to 2030. The lower wholesale prices drive a reduction in retail prices, with the average household expected to save around $120 compared to business as usual on its electricity bill each year from 2020 to 2030.”

Then they need to appreciate what the Australian Energy Market Commission is saying in its new report – the topic of my post on Monday – to the effect that “without investment in replacement dispatchable capacity, wholesale prices will remain volatile and the (end-user price) rollercoaster will be repeated.”

Unfortunately, of course, the community has its head around very little of this except what its gleans from media soundbites.

For the more engaged stakeholders, there is a need to take the reality pill, too.

“Technology neutrality” has become a catchphrase but what it actually means for the NEM, bearing in mind this version of “neutrality” continues to eschew nuclear energy, is highly debatable.

One of my interlocutors complained to me in an email yesterday with respect to other just-published material about “the sheer lack of understanding of the dearth of system security features of non-synchronous, intermittent, weather-dependent generation technologies,” adding that “the huge costs of add-ons required to go close to accounting for this continues to be under-appreciated.”

So it is time to trot out one more time the wisdom of the admiral – royal commissioner Kevin Scarce in his report to the South Australian government. Scarce, former senior navy officer and former State governor, said 19 months ago that “identifying whether a particular generation portfolio would deliver electricity at the lowest possible cost requires an analysis of the future cost of the system as a whole, that is the total costs of generation, transmission and distribution.” And he added: “For those planning a future electricity system (and the market in which it will operate) the relevant issue is total system cost (including) inter- and intra-regional expansion of networks and grid support costs.” And also, essentially reacting to the “go for renewables” lobbying he received, “it is not a simple choice.”

You won’t find a mention of total system cost in the spruiking pursued by either the federal government or the Labor party (whether federally or in the States).

Here, for example, in the new climate policy document is the Turnbull regime’s hype for the NEG: “The guarantee is a credible, workable, pro-market policy that does not involve subsidies, taxes, or trading schemes. It will lower electricity prices, make the system more reliable, encourage the right investment and reduce emissions. Importantly it is technology-neutral, offering a future for investment in whatever technology the market needs – solar, wind, hydro, coal, gas, batteries or pumped hydro storage.”

I missed a commentary in The Conversation on the NEG by the Grattan Institute’s Tony Wood in late November; reading it today, I am struck by his observation that this may be the first example in the world where policy seeks to integrate emissions reduction and energy security. It’s the design that matters, he adds, and the hard work on this has yet to be done. He declares: “The fundamental elements of the proposal provide a workable framework, its key elements will have to be part of any effective solution, and a credible alternative does not currently exist. The next best step would be for all parties to commit to making the NEG a workable solution to a serious national problem.”

As has been the case for at least a decade, the critical factor with new energy policy development is politics, bearing in mind that today almost a quarter of the actual federal votes cast go to populist parties and independents (and about five per cent of any voting doesn’t count because it is “informal”).

No objective spectator of our political scene can avoid the notion that we could have a different federal government in 12 to 18 months and the big “what if” has to be the make-up of this administration. Will it be a different coalition? Does it necessarily follow that this would headed by Labor? Which leads to the obvious thought: if it is anything other than some form of the present regime, what is the fate of the NEG?

Dem NEM bones

It occurs to me, reading the new Australian Energy Market Commission report to CoAG ministers on household price trends, published today, that the appropriate theme music for the NEM is “Dem Bones.”

You know how it goes: “toe bone connected to the foot bone” all the way through to “neck bone connected to the head bone.”

And here’s the AEMC: “Wholesale market outcomes are increasingly interconnected with environmental policy, the wholesale gas market and system security.”

(The commission offers this soundbite for the media in the “infographic” on the report: “Consumers are riding a power price rollercoaster driven by changes in generation.” And this thought for the politicians: “The key to an orderly restructure of the electricity sector is to keep making market reforms that don’t add to consumer costs.”)

The AEMC notes that wholesale electricity costs now comprise approximately 30 to 40 per cent of residential power bills – which went up by an average 10.2 per cent from 2016-17 to 2017-18 primarily due to rising wholesale prices flowing from power station closures and, says the commission, will decrease by 6.6 per cent in 2018-19 and 2019-20 primarily due to them falling again as a result of the introduction of 4,100 megawatts of new capacity (mostly renewables) and the re-entry to the market of Queensland’s gas-fired Swanbank E plant.

Of course, there are a heap of other factors at play and even the experts can struggle to produce a clear picture of the impacts. Here’s the AEMC again: “In (our) 2016 report interconnectors were expected to have a large effect on the trend in wholesale prices” following the close of Hazelwood – but this didn’t happen.

Perhaps the biggest commission expectation in the new report is that NEM electricity demand will stay flat from 2016-17 to 2019-20, so changes in wholesale costs will relate to what happens to supply.

The AEMC’s working hypothesis includes the view that gas prices on the east coast will remain high from 2017-18 to 2019-20.

And reinforcing my “Dem Bones” whimsy is the point that the projected downward trend in power wholesale costs in the short term is expected to be largely driven by new capacity pushed in to the market by the RET – but, says the commission, in the medium term this can contribute to earlier retirement of large-scale synchronous generation (which can’t recover operating and maintenance costs in the greener market), decreasing competition and increasing wholesale prices.

“Without investment in replacement dispatchable capacity,” the AEMC adds, “wholesale prices will remain volatile and the rollercoaster will be repeated.”

And there is another joker in the NEM pack: the expected decrease in wholesale costs, the commission warns CoAG ministers, “may not necessarily translate in to lower retail prices for consumers” because of increases in environmental and/or network costs in some jurisdictions.

There is also the small matter of the impact of RET flow-on effects on hedging contracts, a key NEM activity for generators and retailers faced with significant trading risks – an issue about which the community knows virtually nothing and cares even less. The commission says, “As traditional generators retire, there will be fewer (power producers) to supply firm hedging contracts (resulting in) upward pressure on wholesale electricity contract prices.”

“Further,” says the AEMC, “(with fewer generators providing contracts) the risk faced by retailers from volatile spot prices may increase” because they can’t hedge. Over the long term “this potentially affects the level of retail competition.”

Green boosters and politicians on the make brush this stuff aside as they rush to promote greater and greater levels of wind and solar investment and, especially the Labor party at federal and State levels, to capitalize on public sentiment favoring renewable energy.

(On this point, after a weekend when Bennelong voters dashed Labor hopes of a boilover in federal government, it is worth, I think, drawing attention to the latest Essential Report poll. The question posed was “when considering the outcomes of energy policy, what do you think should be prioritized?” Thirty-seven per cent of respondents opted for keeping down the cost of energy, 18 per cent for maintaining supply reliability, 15 per cent for reducing carbon emissions and 22 per cent said “we do not need to prioritize, all can be achieved.” Good old “don’t know” achieved seven per cent. Essential Report last posed this question in June when those opting for keeping costs down totaled 28 per cent. That was also when a special Newspoll found 60 per cent of respondents wanted action to push down energy prices as a top priority, with 10 per cent opting for prevention of power blackouts and 24 per cent wanting carbon abatement as the primary policy objective.)

Coming back to the new AEMC report, the commission includes this quiet admonition to CoAG: “A number of governments (have) recently introduced their own energy policies aimed at increasing renewable generation, providing system security or putting downward pressure on wholesale spot prices. These policies, like the RET, have the potential to additionally affect supply/demand dynamics and wholesale electricity costs.”

Considering the amount of shouting in some quarters about the impacts of environmental policies (the RET, solar subsidies and so on), one should also record that the AEMC says they and system security costs range from three to 14 per cent of household bills, depending on jurisdiction – and are higher in the ACT and SEQ. Looking out to 2020, the commission sees them decreasing in SEQ but rising elsewhere in the NEM. The reason they’re going down in SEQ is that the Palaszczuk government has reacted to non-PV community growls by removing the smeared solar bonus scheme charge and shifting it to taxpayers……….

The direct costs of environmental policies are estimated by the commission to rise by around 19 per cent over the next two years mainly due to higher costs for certificates under the large-scale RET and also State environmental feed-in tariffs.

Finally, given the importance of network costs in residential power bills (with transmission charges amounting to 5 to 12 per cent and distribution charges 30 to 45 per cent), the commission expects this component to rise in South Australia between now and mid-2020, to remain stable in south-east Queensland, New South Wales and Victoria, and to fall slightly in the ACT and Tasmania.

The bottom line in the AEMC message to ministers is that short-term gains flowing from fluctuations in wholesale power costs won’t last without investment in new dispatchable generation capacity – and it makes no bones about the problem: “uncertainty is stopping investment and will put upward pressure on prices in the medium term.”

Grounds for optimism?

Given the events of 2017, it might seem a little quirky for the Australian Petroleum Production & Exploration Association to pick “Resilient business – success in the new energy market” as the theme for its 2018 annual conference, but optimism has long been the trademark of oil and gas producers.

Thus we see Kevin Gallagher, Santos CEO and lead industry speaker at the APPEA conference in Adelaide next May, opining that the biggest game-changer for the sector in 2018 would be opening new areas for gas development in New South Wales (where the incumbent Coalition government has made footdragging on this issue an art form) and the Northern Territory (where the relatively new Labor government is torn between the competing lures of considerable future economic benefits and the politics of cosying up to the NIMBY movement).

Gallagher says the Macarthur basin in the NT “has the potential to do for Australia what the shale gas revolution has done for America,” which is a pretty big statement when you consider what the US shale oil and gas boom has accomplished in the past decade, turning that country’s energy environment on its head thanks to embracing the new extraction techniques of drilling horizontal wells and hydraulic fracturing.

Gallagher adds in a promotion for the APPEA conference that the opportunities here to find new solutions integrating gas, renewables and energy storage are “limited only by our imagination” – and, one may add, by the toxic quality of the national energy debate.

APPEA chief executive Malcolm Roberts acknowledges that 2017 has been “challenging” but he, too, sees hope in greater recognition of the importance of natural gas for national energy security and a transition to lower carbon emissions.

In a new submission to the CoAG Energy Council, which is due to hold a potentially critical meeting about policy next April, APPEA argues that time is running out for the development of new unconventional gas resources to replace the declining output from existing eastern Australian fields and ward off further east coast supply tightening and higher prices.

Another worm in the apple comes via the Australian Energy Market Operator, in a just-released statement on gas supply and demand, warning of a domestic shortage in Western Australia if new resources are not brought onstream in the next five to seven years. The cause for concern is that WA petroleum exploration is at its lowest level since 1990 – and the new Labor government has imposed a moratorium on hydraulic fracturing, baulking exploitation of large potential onshore shale resources.

The WA government is embarked on the 14th review of fracking in Australia while the 13th, arranged by the new NT government, has just delivered a report which the panel chair, Justice Rachel Pepper, encapsulates as saying: “The overall conclusion of the report is that risk is inherent in all development and that an onshore shale gas industry is no exception. However, if the recommendations made are adopted and implemented in full, those risks may be mitigated or reduced – and in many cases eliminated altogether – to acceptable levels having regard to the totality of the evidence.”

How far it is realistic for the industry to be hopeful that Pepper-style commonsense will prevail in WA, the NT, NSW and even Victoria (where the Labor government seems determined to shoot the State economy and consumers in the feet despite decades of reliance on gas as an essential service) is debatable – and has been debated many times at the APPEA conferences and the Australian Domestic Gas Outlook conferences (the next is in Sydney in February) over the past six years.

APPEA is taking some further cheer from the latest report in to gas supply by the Australian Competition & Consumer Commission and the coincident Shell announcement that will bring the Arrow resource in Queensland (“the largest undeveloped resource on the east coast”) to both domestic and export markets.

APPEA points out that the ACCC report “confirms that the gas industry and Queensland’s LNG industry in particular has secured east coast domestic gas supply for 2018 and 2019,” following heavying of production companies by the Prime Minister earlier this year which in turn followed dire market operator warnings about potential shortfalls lying ahead.

The association takes particular note of the commission saying that “the best way to address the supply shortage in the southern States is to increase production of gas in the southern States.” As Roberts sees it, the ACCC paper “places the blame for higher-than-necessary gas prices at the feet of governments,” and in particular those in NSW and Victoria. To which APPEA adds that further reform of transmission operations will help, given they “can add $2 to $4 a gigajoule to prices in southern States” when gas has to be ferried long distances.

And Roberts tosses in another sharp point, too: the ACCC report, he says, “continues a trend this year of dramatic revisions of demand forecasts,” in this case converting a 55 petajoule east coast shortfall for 2018 predicted in September in to a 20 PJ surplus six weeks later. “Cooler heads,” he suggests, “need to prevail in 2018.” Now that really is optimism.

Speaking of reports, and hasn’t 2017 seen a tsunami of them, there is also a paper just published by BDO, accounting and management consultants, that looks globally and locally at gas markets – and among its observations is that the mooted Australian west-east gas pipeline, now subject to one of the Turnbull government-funded feasibility studies launched this year, should not be dismissed as a pipedream. Local BDO partner Andrew Hillbeck says: “It’s a possible solution and it’s an opportunity for innovation – at the very least it requires more consideration.”

However much optimism producers want to project, business consumers, and especially the manufacturing industry, still view 2018 with trepidation. Their concerns are summed up by ACCC chairman Rod Sims, who says that “despite increased supply providing important short-term improvements in conditions, the market is still not operating as well as it could.” Prices, he asserts, remain higher than they would be in a well-functioning and competitive market.

Prices offered to large commercial and industrial businesses have fallen back from $16 per gigajoule early this year to between $8 and $12 – but, says Sims, “the picture for smaller C&I customers remains bleak.” Some, he adds, are “in a precarious position.”

And because there is always one more thing to consider in the wild ride that is the gas game these days, bear in mind comments by National Australia Bank a fortnight ago, warning that Victoria is in “a tricky position” for electricity supply this summer (owing to generation issues at Loy Yang A and Yallourn power stations) and that this may lead to greater dependence on gas turbines with flow-on impacts on southern fuel availability and on wholesale electricity prices in the NEM.

 

Brave new world

It was inevitable that the media would leap on AGL Energy’s Liddell announcement at the weekend to the disadvantage of the federal government and of Malcolm Turnbull in particular as he led the charge to bully the company in to not shutting the plant.

Needless to say, the ALP has leapt on the company announcement, too, with Labor’s Mark Butler taking the hyperbole prize for declaring “Turnbull ends 2017 with his vision for the future of Australian energy in tatters.”

Lord alone knows what was going through the minds of the Prime Minister and others when they pulled this stunt; the proverbial petshop galah could have told them it wouldn’t fly. Their immediate reaction ploy now is to flick what AGL says it plans to do to the Australia Energy Market Operator for assessment – with a response required in February.

Josh Frydenberg, however, is pushing the point that should be uppermost in the minds of all concerned. “We are technology agnostic when it comes to generation,” he’s telling the media. “Our priority is the stability and affordability of power to Australian households and businesses.”

Here on the other hand is Bill Shorten, while campaigning in the seat of Bennelong with Kristina Keneally: “We need more renewables in our energy mix. We need to reform the national energy markets. We need to also make sure that we’re getting the gas that is produced in Australia prioritized to be sold to Australian industry first. Labor is for certainty. This will deliver new jobs in renewables. It will deliver fair dinkum action on climate change. And the fact of the matter is that good energy policy is good environment policy and vice versa. We are determined to make sure that Australians get lower energy prices and we’re going to do it by encouraging investment in renewable energy.”

In all the fuss, it would probably be as well to remind the community how New South Wales gets its power before greenwash wholly obscures the picture. Unfortunately, they seldom get this information – the Punch & Judy show that is our politics is of far more media interest.

Electricity generators in the NEM’s biggest region (accounting for 37 per cent of the market’s power) provide a “baseload” of 5,500 megawatts and are challenged to meet up to 14,000 MW when summer demand is at its peak.

The NSW market is currently serviced in the main by 10,160 MW of black coal-fuelled plant and 4,803 MW of gas and hydro capacity (of which 4,236 MW is of the “quick start” mode).

To which must be added supply vulnerable to the weather and time of day: some 1,200 MW of household rooftop solar power, 155 MW of utility-scale PV at Broken Hill and 660 MW of wind farm capacity.

And, not to be overlooked, NSW relies also on what capacity is available over the NEM interconnectors (critically from Queensland during a south-east heatwave, that is from more black coal and gas plants).

One of the core facts to be found in AEMO’s modeling is that it expects a small decline in NSW overall power needs between now and 2022 – reaching just under 66,000 gigawatt hours that year (2,000 GWh less than the power industry was forecasting in 2015) – but it can’t see a fall in peak requirements and perhaps there will be a rise.

As Tim Nelson, AGL’s chief economist, puts it, “the (NSW) market will require less energy but the same or more capacity.”

Explaining the thinking behind the company’s life-after-Liddell approach, Nelson says: “The combination of stable or rising peak demand, declining underlying energy demand and increased output from variable renewable generators has distinct implications for the type of investment required to replace Liddell. The amount of energy served by ‘dispatchable’ generation is decreasing as a result of falling energy demand and increased output from variable renewable resources. Given the same (or even an increase in) capacity is required but the amount of energy needed from ‘dispatchable’ generation is lower, the type of complementary plant is likely to shift from inflexible coal plant to more flexible gas-fired plant, better suited to operating at a lower capacity factor. This is reinforced by the increasing need for plant to complement variable renewable resources when they are not producing due to a temporary lack of wind or solar resources.”

On balance, the company’s case is that optimal investment now needs to be in peaking generation and it sees about 1,000 MW of new fast-start capacity being required – while still sending out some 15,000 GWh a year from Bayswater power station.

Nelson adds this: “While climate change and the need to reduce greenhouse gas emissions has been one major issue being discussed within the context of Liddell, it is clear that changing technology costs and the nature of electricity demand have also been key factors. Longer term, it may be that energy storage (through batteries, pumped hydro or production of hydrogen utilising renewable energy) is a better option than new gas-fired generation. But given renewable penetration in the NSW market is not sufficient to meet minimum demand, there is little benefit to deploying energy storage. This may change as greater levels of investment in renewable energy may see renewable production capacity exceed minimum demand at some point in the future. At that time, storage would be a direct substitute for gas-fired generation.”

Whatever the longer term may hold – and let’s not forget that nuclear advocates strongly believe a genuine technology-neutral approach would open the door to small modular reactors in the NEM in the next decade or that there are a number of other players whose plans could impact on AGL’s aims – it ought to be obvious to all but the blinkered that the backbone of NSW supply is going to continue to be fossil fuels for years to come, subject, of course, to what policy machinations come from the body politic, bearing in mind there will be three State elections and probably three federal polls between now and the mid-Twenties.

What seems unarguable is that one of the keys to avoiding landing eastern Australia (and not least NSW) still further in the energy mire is an adequate and workable plan to ensure there is sufficient gas supply to support “flexible” power generation.

Self interest for AGL, having been frustrated in pursuing gas development in NSW, dictates the LNG importing scheme it now has under consideration. The broader consumer interest should require a major shift in jurisdictional attitudes, in NSW, Victoria and the Northern Territory in particular, towards encouraging unconventional gas development to serve south-east Australia.

The Australian Petroleum Production & Exploration Association points to the Narrabri project being capable of supplying 50 per cent of New South Wales needs, to “significant” resources in Victoria’s onshore Gippsland and Otway basins and to “promising” resources in South Australia – apart from what the Northern Territory onshore prospects could deliver.

Whether what has gone on at official levels in 2017, via the CoAG Energy Council and so on, is a harbinger for progress in this regard in 2018 is an open question.

A pessimist would say not but the Turnbull government can’t afford to be pessimistic.

Speaking to journalists late last month, the Prime Minister declared that, by the time the Energy Council meets in April, we can expect to see the “national energy guarantee” fully fleshed out and in a position where it can take the energy market “into a new world where we have reliable, affordable energy and meet our emissions reduction targets.”

I’m tempted to say “Yes, Prime Minister” but that would be naughty and I don’t want Santa to just give me a lump of coal — and I’d like Turnbull to be right.

Finding the goalposts

The promise by Premier Gladys Berejiklian that there will be a full-on New South Wales cabinet discussion about energy can only be welcomed, even if it is long overdue.

The political crowbar achieving this development is being wielded by the State’s Nationals, led by Deputy Premier John Barilaro, pushing to have funds from the Lands & Property Information Service privatization spent on a new, coal-fired power station, either built by the government or in a public-private partnership.

It’s not that power needs for NSW have been ignored lately but all the big focus earlier this year was on an attempt by the federal government, led by Malcolm Turnbull himself, to force AGL Energy to agree to extend the life of Liddell power station beyond 2022 or to sell it to an entity that will do so. The company seems to have been successful in fending off this pressure – with about a fortnight to go for CEO Andy Vesey to report back to Turnbull on its plans to replace Liddell.

Vesey told a newspaper forum in mid-November that post-Liddell about 1,000 megawatts of firm capacity – or an energy need of eight terawatt hours a year to avoid a projected market shortfall in supply — could be realized from an efficiency upgrade for Bayswater coal-burning power station (providing about an extra terawatt hour), up to 1,600 megawatts of variable renewable energy (delivering 6 TWh), a 250 MW storage battery, a new gas-fired plant and up to 100 MW of demand response. This was not new news; it had initially been shared with AGL shareholders at the AGM in September.

How much of this will form part of the NSW cabinet discussion is a good question.

Will the debate focus just on whether the State should be engaged in building a new coal plant, will it be broadened to canvass the state of play in NSW gas development and will it include a review of wind and solar power developments for the decade ahead and all the implications inherent in that?

The big context for all this is the dominant role of NSW in NEM electricity demand and supply. The huge amount of attention the situation in South Australia has received in the past year belies the fact that SA accounts for just six per cent of NEM demand – NSW’s share is 37 per cent (with Queenland at 28 per cent, Victoria 24 per cent and Tasmania five per cent). The economic and social impacts of getting NSW electricity supply wrong in the next decade would flow well beyond the State borders.

Earlier this year the NSW Energy Minister, Don Harwin, declared: “Ensuring the security of our energy supply is at the core of the NSW government’s energy policy and increasing the diversity of supply through renewable energy sources is key to our strategy.”

In round terms, the State government says the electricity mix at present is 79 per cent coal-fired, seven per cent gas-burning and 14 per cent renewables – of which almost a third is provided by Snowy Hydro. The third attributed to solar power by the government is substantially on household rooftops.

The actual 2016 numbers for generation to the grid in NSW were 54,271 gigawatt hours of coal-fired production, 2,604 GWh from gas turbines, 3,645 GWh from hydro systems, 2,030 GWh from wind farms and 492 GWh from utility-scale solar. That’s a coal share of 86 per cent (down 1.5 per cent on the 2015 power output mainly because the call on hydro almost doubled last year).

A statement from the Berejiklian cabinet after the foreshadowed discussion on how it sees the supply mix in, say, 2025 and 2030 and what needs to be done to deliver on this picture would be very useful – particularly if it is accompanied by some expert work on the total system cost of this transition and some idea of what this means for business and household users.

Most meaningful of all, perhaps, would be a clear statement of the role the government sees gas playing in the transition, bearing in mind the first half of the dictum from Harwin quoted above.

There’s a trenchant comment on today’s situation in the media at the moment from the federal Resources Minister, Matt Canavan, who is backing the Nationals’ push for a new coal power station: “Gas looks a non-starter in NSW given the (State) government’s on a go-slow on gas developments and the only other option appears to be coal. We hope the NSW government makes decisions to keep its electricity supplies strong so prices can be kept under control.”

When the Liddell controversy first blew up, one of our most senior political journalists commented that, in trying to grapple with energy issues, the Prime Minister is playing on the right field – “but being able to kick goals in another matter.”

It’s a thought that could be extended to the NSW government at present – and starting with defining the State energy playing field would be a good idea along with producing a clear sense of where the goalposts lie.

A quote from the Grattan Institute last week is also relevant: “Our politicians need to focus on the substance of this debate, rather than the headlines. Hitting each other over the head because there are too many – or too few – renewables in the policy basket is pointless and will ultimately prove self-defeating.”

Baby steps

How to assess where we now stand on a national (actually east coast) energy policy?

The beleaguered federal government, with fresh bruises after the Queensland State election, is claiming a win from Friday’s CoAG Energy Council meeting in Hobart – but it would say that, wouldn’t it.

Labor has sort of made it clear that the Finkel-designed clean energy target is still on the table – and its chances of being in government before 2018 is over can’t be ruled out.

Almost the only thing settled in Hobart was that the motley ministerial crew agreed that in future the Energy Security Board would take its instructions from the collective rather than Messrs Turnbull and Frydenberg.

Lurking somewhere in the wings is a federal government statement on climate change policy, promised for this year but I would have thought unlikely to materialize before the Bennelong by-election.

Should Annastacia Palaszczuk emerge from the Queensland election with a clear parliamentary majority (and there are 800,000 postal votes still to be counted), we will have two of the three dominant NEM regions (her State and Victoria) pursuing renewable energy targets of 40 to 50 per cent by 2030 – with New South Wales to go to the polls in March 2019 and Bill Shorten still seemingly holding to a national 50 per cent RET. (Labor’s political line is that “the Turnbull government’s NEG will strangle renewable energy.”)

We also have the the Coalition federally continuing to support feasibility work on “Snowy 2.0” pumped storage, Basslink 2 and a West/East gas pipeline – with AGL supposed to tell us relatively soon what it has decided about a LNG terminal on the south coast.

And, in the run-up to the current RET deadline of 2020, we have investors large and small en route to adding about 3,000 megawatts a year to the NEM, mostly wind and solar PVs.

As agreed in Hobart, the ESB is now embarking on further “national energy guarantee” design – with South Australia and the ACT declaring they will commission their own research on modeling the NEG against the Finkel CET and an emissions intensity scheme, having been thwarted in this aim at the Energy Council by Victoria’s Labor government voting against the idea

The CoAG communiqué from Hobart tells us as the main take-away message in the communique that what they did all agree on is that their top priority is “ensuring reliable and affordable electricity supply whilst working towards a lower emissions future.”  Fine words.

Where all this leaves consumers, mass market, small business, industrial and large commercial, right now is also relatively clear: they remain piggy in the middle, dependent in the near term on their own capacity to chase lower costs either through new contracts or reducing their demand for power, or both.

How many in the community understand the implications of the NEG is debatable but it will not be a high number. How many trust the body politic to deliver lower energy prices is not really debatable – polling suggests less than a third. (By the way, on the numbers available to date, little more than 60 per cent of Queensland voters gave their primary support to Labor on the Coalition on Saturday………)

On the eve of the CoAG meeting, 16 bodies representing business, farmers, NGOs, environmental groups, energy associations and the ACTU published a plea for governments in the federation to work “in a spirit of compromise” to make further development of the NEG a priority. It appears, they declared, “there are no alternatives at present that are both potentially functional and potentially acceptable to all sides of politics.”

Collectively, the 16 bodies called for the political focus to be on:

  • Competitive, transparent and liquid electricity markets and efficient investment to deliver the lowest sustainable costs to energy users
  • A credible, scalable and enduring settlement of climate policy for the electricity sector
  • Confidence to support investment in the full range of energy services as old generators retire
  • Comfort that any impacts on industry and the community are understood, equitable and well managed.

They want to see a “fully-fledged” NEG design ready “as soon as possible” for agreement and implementation. Without timely progress, they add, “Australia will see energy costs and emissions increase.”

The Hobart meeting won’t have given them even a half full cup and then only if they are feeling especially optimistic. After the ministerial get-together, one of the industry association CEOs opined that “”We’re taking baby steps forward, but that’s far better than giant steps backwards.”

Before the meeting, David Blowers of the Grattan Institute wrote: “Our politicians need to focus on the substance of this debate, rather than the headlines. Hitting each other over the head because there are too many – or too few – renewables in the policy basket is pointless and will ultimately prove self-defeating. Instead, how about finding an actual policy solution?”

After Hobart, this still holds good. Whether the meeting outcome is really positive is in the lap of the political gods.

Storage under scrutiny

The opening paragraph sets the big picture: “Australia is undergoing an energy transformation that promises to intensify over the coming decades. In the electricity generation sector this transformation involves: a greater reliance on renewable energy in response to climate mitigation policies; relocation of where energy is generated and distributed as a result of changing economics of energy costs and technological developments; and how and when energy is consumed with the advent of prosumers.”

Thus begins the report on The role of energy storage in Australia’s future energy supply mix, published today by the Australian Council of Learned Academies working in tandem with Chief Scientist Alan Finkel, a commentary bringing energy back in to the media headlines.

The sum of the report’s message is quite neatly conveyed in the opening sentences of the media statement heralding its publication: “The report shows that Australia has a wealth of natural advantages (in developing large and home-scale energy storage systems) that could aid the development of new industries, exports and create jobs in mining and manufacturing. It also warns that, without proper planning and investment in energy storage, electricity costs in Australia will continue to rise and electricity supply will become less reliable.”

And this, in part, is how the 158-page report concludes: “There is a near-term requirement to strengthen Australia’s energy security in NEM jurisdictions and maintaining acceptable energy security levels for customers will dominate over energy reliability requirements until well in excess of 50 per cent renewable energy penetration.”

It also observes elsewhere: “Australians are deeply concerned by the sharp rise in electricity prices and affordability and hold governments and energy providers responsible for the perceived lack of affordability. Energy storage is not a well-known concept in the community and concerns exist at the lack of suitable standards at the household level. Australians favour a higher renewables mix by 2030 – particularly PV and wind, with significant energy storage deployed to manage grid security.”

The never-ending political problem is Australians want to feel good about the environment but don’t want to pay the butcher’s bill for going green.

The ACOLA panel says that further work is needed to establish “the optimum balance of generation, storage and interconnection, taking into account both cost optimisation and the long-term strategic opportunities for Australia.” It recommends “a deeper analysis of opportunities for growth of a substantial energy storage industry in Australia.”

Among the threats to a brave new world of storage seen by the panel are policy and regulatory risk (caused by “unsupportive energy policy or inadequate safety or environmental standards”) and market development risk (“distortions promoting an inefficient storage mix”) as well as “land use issues and resource availability limiting certain technologies.”

The panel says public opinion research it has had undertaken demonstrates that “there is low (community) trust in the Australian energy system’s capacity to deliver consistent and efficient electricity provision at reasonable prices” and “deregulation of the electricity market, changes in feed-in-tariff schemes and other time of use tariffs have led to an underlying general mistrust of the government and energy providers.”

It adds: “The majority of those surveyed suggested they would look to government to play a role in the future energy mix, but lacked confidence that their preference for higher renewables would be achieved without consistent energy policies.”

The panel reinforces public scepticism by warning that “without effective planning, appropriate investment and also incentives to develop and deploy energy storage technologies, the costs of electricity in Australia will continue to increase and there will be less reliable (adequate and secure) electricity supply,” threatening “large negative implications on the Australian economy.”

One of the panel’s more telling observations, it seems to me, is: “The availability of private sector risk capital and profitable revenue streams for Australian energy storage start-ups and projects is a challenge for new ventures, as is policy uncertainty. Profitable revenue streams from energy markets together with consistent, stable and integrated energy and climate policies will be essential to drive investment in energy storage and other technology solutions that support decarbonization of the electricity system while ensuring system security and consumer equity. Technology-neutral market-based reforms will be required to address these challenges at least cost.”

Note the last sentence – what could be further from the minds of the green boosters and a great many politicians ever on the hunt for (vote) winners to pick?

Tucked away in the report is the observation that the different types of energy storage “have varying costs and other characteristics,” so determining the “best” form (the panel’s inverted commas) depends on where it is needed, for what purpose, the nature of the electricity grid and current and future types of generation.

There is also this not-minor thought: “Unless planned for and managed appropriately, batteries present a future waste management challenge.” Someone will have to pay for that, too.

The paper is not exactly a slam dunk for energy batteries, then, a point that might be missed by casual readers of the media.

None of the forays in to storage – and there is near universal agreement among the more educated scanners of the power market scene that this technology in a number of forms must have a role in the transition taking place – will come cheaply.

Modeling for the ACOLA panel suggests that storage investment for the current approach to renewable energy would be $3.6 billion (in what the modelers assume will be 2030 money values), $11 billion for the RET Labor is pushing and $22 billion under the target green activists want pursued.

The report is upbeat about opportunities for Australian innovation as well as energy storage intellectual property and for value-adding for beneficiation of our mineral resources such as lithium – it would be very surprising if such a panel did not take this view but this aging sceptic thinks Us Outdoors should be mindful of all the promises of a decade ago about local manufacturing of wind and solar gear and the fact that local energy investors most frequently pick up technology from the best overseas sources while our politicians keep veering off in to the interventionist bushes for their venal reasons as well as hacking at subsidies when the consumer cost heat gets too much to bear.

In the best of all worlds, Australian opportunities are exceptional but we will have to lift our collective game a long way to pursue optimal outcomes.

Finkel, talking to the media at the report’s unveiling in Canberra today, said “We have a long way to go and the best thing to do is to start now.” There’s a lot more to that statement than the glib “Bill Shorten is right” (about a 50 per cent RET) being picked up in media headlines as I write this.

Rather in context, I feel, the Energy Security Board chair, Kerry Schott, was telling a Melbourne conference at roughly the same time that most Australians – “apart from a hard core few” – want to see continuous greenhouse gas reductions but “at the moment all we are doing is throwing grenades at each other which is not very helpful.” Quite.

 

 

 

 

 

 

Scene-setting

To state the bleeding obvious, it is not becoming any easier to have a satisfactory conversation about where energy demand and supply is heading, still more so when cutting carbon emissions is thrown in, whether one is talking about Australia or the world as a whole.

The noises coming from Bonn, where the latest United Nations gabfest on climate change is winding towards an end, illustrates this in any number of ways.

Here, for example, is Angela Merkel, still wrestling as I write this with the challenge of forming a new German government 54 days after the national poll, talking to the CoP23 audience about the Energiewende. “Now, at the end of 2017, we know that we’re still lagging quite a bit,” she said, acknowledging the country’s abatement ambitions are playing a significant role in the talks to form the next governing coalition.

“These talks,” she said, “are about fulfilling the existing pledges, but also about social questions and jobs – for example when talking about reducing [the role of] coal – and about profitability and the affordability of energy.

“Even in a rich country like ours, there are significant conflicts about this in society – and we have to solve them.”

Coal, she said, has to “significantly contribute” to reaching the German emissions target – “but how exactly; that’s what we will have to discuss very precisely in coming days.”

Goodness, and here were we thinking (because the activists constantly tell us so) that all we have to do is follow the German approach and our own “Energiekrise” will be over.

I referred in my previous post on this site to the International Energy Agency’s latest Outlook publication – which, contrary to what can be read in various bits of the media, is not a set of predictions but of scenarios – and overnight I have been looking at an IEA table that seeks to encapsulate our possible global futures out to 2025 and 2040 using millions of tonnes of oil equivalent as a common denominator.

The agency splits its current scenarios in to three: one extrapolates from existing national policies, a second takes up the pledges the world’s governments took to Paris and which form the backdrop for the Bonn discussions and a third is based on what IEA analysts suggest could be the picture if a far more major effort should be made to pursue the goal of limiting climate change.

To continue as we are at present, the IEA suggests will see oil usage at 4,815 mtoe in 2025 and 5,477 mtoe in 2040 – staying ahead of coal (4,165 and 5,045 mtoe) and gas (3,514 and 4,682 mtoe). In this scenario, nuclear’s share of demand is 839 mtoe in 2025 and 997 mtoe in 2040. The renewable segments are hydro power, bio-energy (both traditional and modern usage) and non-hydro resources, mostly wind and solar power. The IEA postulates these at 409 and 511 mtoe for hydro, 1,507 and 1,728 mtoe for bio-energy and 441 and 856 mtoe for wind, solar and so forth.

In this context, we can expect (says the agency) around a 23 per cent rise in energy demand between 2025 and 2040 and the dominance of fossil fuels (coal, oil and gas) to continue – amounting to some 79 per cent of the total a quarter century from now.

Of course, we have the word of governments at Paris that business as usual is just not on, so the outcome of pursuit of their announced commitments is important.

Under “new policies,” which the IEA puts forward as its “main scenario,” the agency projects a situation in 2025 where the coal share is 3,642 mtoe, oil is 4,633 and gas 3,436 mtoe. The nuclear share is 839 mtoe and hydro 411 mtoe – with bio-energy at 1,530 mtoe and wind, solar etcetera at 490 mtoe.

Looking out to 2040 in this scenario, the agency suggests the breakdown could look like this: coal 3,929, oil 4,830, gas 4,356 (overtaking coal), nuclear 1,002 and hydro 511 – with bio-energy up to 3,801 mtoe and wind, solar etcetera surging to 1,133 mtoe (nearly triple what it was in 2025). The fossil fuels share of this outlook is 75 per cent.

The critical factor is the global output of carbon dioxide emissions, which the agency sees falling from 42.7 gigatonnes annually in 2040 under business as usual to 35.7 Gt under “new policies.”

This, it points out, will not deliver a desirable outcome in managing climate change, which is why it postulates a “sustainable development” scenario in which coal plunges to 1,777 mtoe in 2040, oil is at 3,306 mtoe and gas at 3,458 mtoe while nuclear’s share rises to 1,393 mtoe, hydro power is at 595 mtoe, bio-energy is 1,551 mtoe and wind, solar etcetera soars to 1,955 mtoe.

In this scenario, global energy demand has fallen to 14,084 mtoe (on the back of a major energy efficiency drive) and global annual carbon dioxide emissions are down to 18.3 gigatonnes.

However, even this is still a world in which fossil fuels deliver 61 per cent of energy needs to a population now pushing towards 10 billion people.

Green activists claim to like this scenario (which they treat as a prediction) because, as one local booster put it this week, it shows coal to be “dead and buried” as a source for electricity – which it doesn’t. But the big issue (in terms of managing greenhouse gas emissions) is the whole global energy scene and, even after what would need to be a Herculean investment effort, coal, oil and gas would be a significant part of meeting the needs of the world’s community if this scenario came to fruition.

It’s worth noting also that this “sustainable” model sees nuclear and hydro power together – both technologies the darker greens strongly oppose – making a contribution bigger than bio-energy and roughly as big as wind, solar etcetera.

Earlier this month I saw a major newspaper here headlining our “torturous” path to the energy future. “Torturous” is characterized by pain and suffering; but, perhaps inadvertently, the paper has it right, I think. Our local debate would be a tad less torturing if more of it could focus on real analysis rather than guff, emotion and wishful thinking. As one of my distinguished (and exasperated) colleagues put it in an email exchange this afternoon “sound energy policy has become perverted by unfiltered tripe,” calling for more sagacity in assessing the situation.

Such times!

There is so much on the menu, both officially and unofficially, at the UN’s gabfest about climate change (“CoP 23”) in Bonn that it is inevitable media coverage amounts mostly to “snatch and grab” as I recently saw one journalist say when she meant “smash and grab.”

Between the activists, who treat the UN meetings as an opportunity for headline-grabbing and ritual defenestration of anyone speaking up for fossil fuels, and the politicians (from Angela Merkel to people whose names you won’t remember beyond your next sleep) hunting domestic kudos for virtue-seeking (eg Canada’s environment minister “declaring war” on coal for a country that has 10 per cent of the fuel in its power mix and nevertheless is struggling to meet the promises it made in Paris in 2015), the flow of information is pretty indigestible.

When it’s all done there hopefully will be a set of rules for carbon mitigation and keeping track of the Paris commitments thanks to hard work in back rooms but the visible process is living down to past standards.

Meanwhile, by way of an essential backdrop (for the few looking beyond Bonn’s funny business), there is the carefully coincident publication of the International Energy Agency’s latest World Energy Outlook.

Just one aspect of this should represent rather grim news for the shoals of government officials and ministers swimming through CoP23’s waters. Oil, says the IEA, will continue to grow as a source of global energy over the next two decades, driven by continuing demand growth in the large communities of what we used to call the “developing world,” quite a lot of its in our own Asian backyard.

The much-hyped take-up of electric cars forecast for the years from now to 2040 will not serve to consign oil to the scrapheap of history, opines the IEA. This inconvenient indicator, along with a predicted 45 per cent increase in demand for natural gas and continuing substantial use of coal, makes a mockery of the “death of fossil fuels” mantra that crops up practically weekly in public debate.

The IEA attributes the ongoing major growth in energy demand (rising 3.4 per cent a year) in the main to “a population that expands from 7.4 billion today to more than 9 billion in 2040 and a process of urbanization that adds a city the size of Shanghai to the world’s urban population every four months.” (That’s 12 Sydneys a year if you do the maths.)

As I have said here on more than a few occasions, I have problems with the language the agency employs as in its public statements in playing to the renewables gallery. In this new report, for example, it includes as a headline in its media briefing “coal strikes out” – and then tells us that, after adding 900,000 megawatts of coal-burning capacity to the global generation mix between 2000 and now, there will “only” be a net addition of 400,000 MW to this part of the world’s power supply between 2017 and 2040. Howzat?

Moving on, our local upstream petroleum producers see the IEA’s new report as an early Christmas present.

In a new media statement, Malcolm Roberts, CEO of the Australian Petroleum Production & Exploration Association, explains why “the IEA forecast of an increase in the share of gas in global energy demand is great news.”

Roberts says: “Our $200 billion investment in LNG projects will supply a growing global market over the next 25 years.  This means Australians will see a steady stream of high paying jobs, export dollars and revenue for governments for decades to come.

“Most of the growing demand for natural gas is expected to come from China, India and other countries in Asia that have significant concerns over air quality. Our proximity and reputation for reliable supply make us well-placed to capitalise on this growing opportunity.”

He adds: “The World Energy Outlook also highlights the environmental credentials of gas as a cleaner-burning power source and a key part of moves to reduce carbon emissions in Australia and around the world.”

And, of course this news is another peg on which APPEA can hang its constant message to our policymakers, federal, State and Territory, and to voters (supposing they ever get this point). “The IEA report,” says Roberts, “also highlights a major challenge for Australia, with the United States expected to become the world’s leading LNG exporter by the mid 2020s. The opportunity (for us) is huge but our competitors are hungry. In an extremely competitive global market, we cannot be complacent.

“If Australia is to capture further investment in LNG production, it is vital we get the policy settings right by maintaining a stable and competitive tax regime and reducing regulatory costs.”

Despite the value of the existing gas industry (serving export and domestic markets) for our economy – via jobs and local industry expenditure – and for government income via taxes and royalties, I fear our community in the eastern States (making up 86 per cent of the population) just now doesn’t give a hoot for the global opportunities; the focus here is on current domestic needs in terms of adequate supply and prices well below today’s levels.

Ongoing gas production developments targeting the overseas market — Chevron’s 8.9 million tonnes a year Wheatstone project is in its commissioning phase while the 3.6 million tonne capacity Prelude floating LNG facility, operated by Shell, and the 8.9 million tonne Ichthys venture by Japan’s Inpex are due to start production next year – just don’t get the popular media attention of yesteryear and may even rub salt in the pain of consumers in the mass market, farming and manufacturing because they underscore that half of our gas production goes abroad (and it will be more by 2020).

The contrast with America is stark: despite expected rapid LNG export capacity growth, the US Energy Information Administration’s Annual Energy Outlook 2017 projects their trade to amount to only about nine per cent of total domestic natural gas production by 2020. And US domestic gas prices are far lower than they are here.

It’s not surprising in this environment that our West Australian friends see opportunity – with an “O” – in the east or that the Turnbull government (struggling critter that it is) sees value in a feasibility study in to a $5 billion pipeline serving the five mainland States on this side of the Nullabor. Even if this goes ahead (and when might it be operational?), the price problem remains, something the Finkel report saw fit to point out, warning that the benefits of supply security need to be weighed against consumer costs.

All of which brings us around to the prospect of some of the West’s LNG being shipped to Melbourne or Newcastle.

Analysts UBS painted a rather dark summary of the situation in an October review. “Key conclusions,” they said, “are: 1, the east coast will remain reliant on diverted Qld LNG supplies for at least the next five years (and most likely longer), as alternate gas supplies of any size are still a few years away; 2, (project) cost and distance of new supply from markets means that (new) development is unlikely to exert material downward pressure on east coast gas prices any time soon; 3, declining Victorian supplies mean that South Australia and New South Wales will become increasingly reliant on alternate sources; 4, the largest sources of potentially lower cost supplies (NSW, Northern Territory shale) face regulatory issues; 5, there is room for LNG imports, but landed price is a key challenge; and 6, the elephant in the room is the Gippsland Basin JV – just how much additional gas is it able to bring to the market and at what price?”

APPEA’s Roberts acknowledges that “west coast gas is likely to be an expensive solution to east coast supply concerns,” urging political acceptance that “the reality is local gas will always be cheaper gas.” It is, he adds, “incredible” that Victoria and NSW, home to the biggest problems, are determined to rely on other States to save them.

Of course it’s incredible but, as you may have noticed, the incredible is becoming normal in our politics across a wider spectrum than the “energy crisis.”

It’s hard to go past Dickens in our present state. Remember? “It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity” etcetera.

Carrying power fears to polls

If you wanted to come up with a core perception about energy among the mass of our population as 2017 winds down, it might be that, to quote a letter writer to a regional newspaper this week, “there shouldn’t be an energy crisis in Australia.”

This comes with the community-wide understanding that 20 years ago we had some of the world’s cheapest electricity prices for consumers large and small and now we don’t.

Analysis of public opinion published by Roy Morgan Research this weekend shows that the “energy crisis” is now the single biggest domestic issue on the minds of Australians, attracting 14.2 per cent of reactions versus, for example, 7.5 per cent for unemployment.

I suspect all the rhetoric about this from politicians and key players washes right over the broad community; “just fix it” is the mindset of the masses. (And Roy Morgan finds “lack of vision” by politicians is the biggest worry for 5.5 per cent of respondents.)

Regrettably, the cliché of choice for those charged with dealing with energy matters is correct: there is no silver bullet – still less so when the actual challenge is to make energy not only more affordable but also reliable and there is a further political necessity to apply greenwash. As I saw a lawyer write in the past week, “The energy mix is a policy decision but, regardless, what everyone needs is reliability at a reasonable price.”

Right now the federal theatre is consumed by the drama of the right of a raft of MPs to sit in Parliament House, Canberra, an issue that has morphed in to debate about Malcolm Turnbull’s capacity to stay Prime Minister and could, it seems, take us to a point where the Coalition loses government next year. This leaves the “energy crisis” caravan suddenly parked at the pavement, a situation that could change again if summer brings a threat to power supplies in the eastern States.

In the meantime the citizens of Queensland are at the polls, two months before they expected to be (because the timing suited Premier Annastacia Palaszczuk), the first major election to be held since “energy” and “crisis” became joined in politics and the media.

The State election outcome is anyone’s guess, in part because of the possible impact of One Nation and other minor parties. What is obvious some two weeks before Queenslanders vote is that quite a large number of them, significantly those in the State’s central and northern regions, especially farmers and small business people, are fed up with (and, in some cases, frightened by) their power bills.

The attitude is summed up by the head of the peak sugarcane growers’ association, who declared this week that “farmers are desperate to find a solution to the rising costs and unsustainable electricity prices.”

Dan Galligan says: “This is becoming a real crisis moment for people in business in Queensland, not just irrigators, but anyone who relies on electricity which is almost every business. For us, as an exporting industry trying to compete with overseas countries that are often under subsidized pricing regimes for the products they grow, we really have to manage costs.”

Queensland Farmers’ Federation president Stuart Armitage, while noting that it is “encouraging” that the contending State political parties are all releasing energy policies and making positive commitments, says what is needed is a “holistic solution” and that the next government must be willing to look beyond one or two areas and commit to a longer-term agenda for an electricity “fix.”

As well, the Chamber of Commerce & Industry Queensland is expressing concern that this month could see a demand peak similar to last February’s heatwave requirement when the State capacity reserve got uncomfortably tight. The Palaszczuk government is promising that it will have the mothballed Swanbank E power station (gas-fuelled) back online by New Year’s Day but CCIQ is fretting that the weather could bite supply before then.

The business association asserts also that 170,000 State jobs are at stake if the energy price problems are not addressed.

The Liberal National Party is promising to restructure the government-owned supply sector yet again, to write down the network asset base by $2 billion and to back construction of a new, 750 megawatt coal-burning power plant in North Queensland – while Labor opposes the FNQ plant and spruiks its plan to have 50 per cent of Queensland electricity supply from renewables by 2030. It is also offering to give households and small business a $300 million discount on power bills while the LNP offers a rebate to farmers.

Former federal Energy Minister Ian Macfarlane, now heading the Queensland Resources Council, argues that building the coal plant will (eventually) “bring down prices for everyone” because of its impact on wholesale costs.

Entirely predictably, Labor has tossed the power privatization card on the table despite the LNP swearing blind it won’t contemplate the move again after doing so helped sweep it from office in January 2015.

(In passing, in the process of pushing State Labor to rule out gas exploration and production bans in the Cooper Basin, the Australian Petroleum Production & Exploration Association has provided some interesting numbers on the contribution of the upstream petroleum industry to Queensland. APPEA says this amounts to 60,582 jobs in 2016, generating $12.8 billion in State economic activity and, in 2017-18, contributing an estimated $885 million in State royalties.)

Come what may in Queensland on 25 November and what may in federal politics between now and about Easter, the energy policy choice (to quote the Grattan Institute) remains between a rare outbreak of bipartisanship or a depressing continuation of current trends delivering the worst outcomes for, in particular, eastern Australia.

For the mass markets and consumers like manufacturers and farmers, the prime focus remains on what they are paying – with new UBS analysis forecasting wholesale power prices will remain relatively high out to 2020 on the back of $8 to $10 per gigajoule gas prices.