Extract from The Guardian
In the watchdog’s advice on solving our energy woes, the word coal doesn’t figure. Neither does baseload
We need to start this weekend with coal, because it’s one of those propositions that plays in Canberra on an endless loop.
For more than a year, Australia’s competition watchdog has been examining the state of Australia’s electricity market in an effort to unravel the various factors behind the high energy prices that are causing consumers and businesses so much angst.
Rod Sims, the ACCC chairman, has produced a report for the Turnbull government that is as solid a piece of analysis as you are ever likely to see, and if we cut to the chase, the report concludes that prices are high because governments, state and federal, have cocked things up.
The report says in the nicest possible way that governments can go on making a mess of things – with the primary victims low-income households who pay a much higher share of their disposable income on electricity – or they can wake up, and unravel their past mistakes with a detailed program of reform.
But the ACCC’s call to action hadn’t even hit the public domain before various Nationals were out seeding their own version of reality. These, incidentally, are the Nationals attempting to make ongoing support for the coal industry the quid pro quo of supporting their own government’s national energy guarantee (Neg).
According to the Nationals’ version of the ACCC’s endeavours, the competition watchdog had endorsed governments underwriting baseload power investments, (and by that, read coal-fired plants) as part of its wide-ranging recommendations.
As some wags say on the internet, huge if true.
There was only one problem with this story.
The ACCC had done no such thing.
The ACCC had proposed underwriting, yes, but not to boost one particular technology or another. The objective was boosting competition.
One of the big problems in the electricity market at the moment is there isn’t enough competition, and new entrants struggle because they can’t always get finance for their projects.
So the ACCC said governments might want to consider underwriting debt finance for project developers seeking to supply power to commercial and industrial customers. Think of this as guaranteeing a bank loan.
In order to qualify for the putative help, the project would need to be large enough to serve the needs of a large number of customers, and capable of providing a “firm” product.
If a firm generation product is a new concept for you, it could be a few things. Possibly new coal, yes, in some universe where someone is prepared to pay a premium and wait many years for the asset to be built and take the risks associated with the plant becoming a stranded asset as the world decarbonises.
But meanwhile, in the real world, this would more likely be a renewables project firmed by gas or pumped hydro, given that would be quicker and cheaper to build, without the long term downside risks that coal invites.
So to recap, the word coal wasn’t used by the ACCC in the context of this recommendation. Neither was the word baseload.
But you wouldn’t know this, of course, if you read or watched much of the subsequent media coverage, because a lot of the coverage was driven by what the Nationals said about the ACCC report, rather than by what the report said.
I know as soon as we enter the debate about climate and energy, some wormhole opens and we are thrust into a new dimension where culture war is king and facts no longer matter. But even by those standards, it was pretty damn bizarre.
It’s possible this could all be an attempt by the Nationals to pretend they’ve bagged a major win before rolling over and backing the Neg – perhaps that’s what this whole performance is about, creating a fig leaf – or perhaps some are front-running an eventual government response, positioning to ensure the government ultimately implements the glorious boondoggle of their collective imaginings rather than what the regulator actually recommended.
But for the rest of us who inhabit a much simpler universe – where people mean what they say and say what they mean – just for the record, the ACCC didn’t flag government underwriting of coal projects to “vindicate” the common sense of Nationals, as the resources minister Matt Canavan noted triumphantly on social media.
In fact vindication was almost entirely absent from the exercise. The ACCC’s report is a public invitation to governments to stop being complete dunderheads at taxpayer expense.
Sims also made it clear this week if governments want to compound the current problems with new ones, then the quickest way to do that is pick winners in the energy market.
Whether governments, state and federal, take up the ACCC’s kind invitation to stop indulging their nonsense and sending us all the bill is moot for now, although it’s clear that the Turnbull government in Canberra is very attracted to the roadmap, largely because it needs a fix on high power prices, and fast.
The Neg will either fly or die over the next month or so, but that mechanism is more about ensuring the national electricity grid is reliable and pollution is trending downwards than it is about lowering power prices.
The government has tried to mount a case that the passage of the Neg will reduce power prices, but that case is thin frankly, and the ACCC report helps call out the thinness of the case by pointing out all the actions that will need to be taken in order to address the problems sitting behind the inflated bills.
The Neg will go to state energy ministers in early August, and any one of them can sink it. Behind the scenes, stakeholders are trying to influence the final cut of the technical design, which will be circulated to the states in late July. There are some small bunfights playing out as decision day gets closer.
In recent months we’ve heard a lot from the stakeholders supporting the policy, but as we hit the home stretch of this debate, the opposing voices will get louder.
Over the coming weeks, the activist group GetUp, environmental groups and the solar industry will be trying to persuade either Victoria or Queensland to say no to the Neg, or to make support for it highly conditional. There will be TV advertisements running in Victoria and Queensland to keep the pressure up.
A number of stakeholders involved in backroom discussions about the policy for months think the ACT government – which has been the most volubly critical jurisdiction about the Neg – will be reluctant to sink it without one of the bigger Labor states in the no column.
It’s a big thing, after all, to sink a potential peace deal on climate and energy policy after 10 years of pitched partisan warfare, particularly if you are the smallest jurisdiction in the Coag energy council.
Amongst Neg opponents, there is frustration that the Victorian government – which faces its own election later this year – has been running dead on the flaws in the scheme, principally the lack of ambition in the emissions reduction target, and there are mutterings behind the scenes about mobilisation against the Andrews government if Victoria signs up to the Neg in August.
One of the Neg opponents is the Smart Energy Council, which is a solar group. Wayne Smith, the council’s government relations manager, told me this week the message to the state governments over the weeks between now and 10 August will be simple: you sign this deal guys, you own it. You can’t pass this off as anyone else’s policy.
“If the state governments sign on with a 26% target, then they own the target and its consequences,” Smith says. “They can’t then put their hands on their hearts and say they support renewable energy.”
For more than a year, Australia’s competition watchdog has been examining the state of Australia’s electricity market in an effort to unravel the various factors behind the high energy prices that are causing consumers and businesses so much angst.
Rod Sims, the ACCC chairman, has produced a report for the Turnbull government that is as solid a piece of analysis as you are ever likely to see, and if we cut to the chase, the report concludes that prices are high because governments, state and federal, have cocked things up.
The report says in the nicest possible way that governments can go on making a mess of things – with the primary victims low-income households who pay a much higher share of their disposable income on electricity – or they can wake up, and unravel their past mistakes with a detailed program of reform.
But the ACCC’s call to action hadn’t even hit the public domain before various Nationals were out seeding their own version of reality. These, incidentally, are the Nationals attempting to make ongoing support for the coal industry the quid pro quo of supporting their own government’s national energy guarantee (Neg).
According to the Nationals’ version of the ACCC’s endeavours, the competition watchdog had endorsed governments underwriting baseload power investments, (and by that, read coal-fired plants) as part of its wide-ranging recommendations.
As some wags say on the internet, huge if true.
There was only one problem with this story.
The ACCC had done no such thing.
The ACCC had proposed underwriting, yes, but not to boost one particular technology or another. The objective was boosting competition.
One of the big problems in the electricity market at the moment is there isn’t enough competition, and new entrants struggle because they can’t always get finance for their projects.
So the ACCC said governments might want to consider underwriting debt finance for project developers seeking to supply power to commercial and industrial customers. Think of this as guaranteeing a bank loan.
In order to qualify for the putative help, the project would need to be large enough to serve the needs of a large number of customers, and capable of providing a “firm” product.
If a firm generation product is a new concept for you, it could be a few things. Possibly new coal, yes, in some universe where someone is prepared to pay a premium and wait many years for the asset to be built and take the risks associated with the plant becoming a stranded asset as the world decarbonises.
But meanwhile, in the real world, this would more likely be a renewables project firmed by gas or pumped hydro, given that would be quicker and cheaper to build, without the long term downside risks that coal invites.
So to recap, the word coal wasn’t used by the ACCC in the context of this recommendation. Neither was the word baseload.
But you wouldn’t know this, of course, if you read or watched much of the subsequent media coverage, because a lot of the coverage was driven by what the Nationals said about the ACCC report, rather than by what the report said.
I know as soon as we enter the debate about climate and energy, some wormhole opens and we are thrust into a new dimension where culture war is king and facts no longer matter. But even by those standards, it was pretty damn bizarre.
It’s possible this could all be an attempt by the Nationals to pretend they’ve bagged a major win before rolling over and backing the Neg – perhaps that’s what this whole performance is about, creating a fig leaf – or perhaps some are front-running an eventual government response, positioning to ensure the government ultimately implements the glorious boondoggle of their collective imaginings rather than what the regulator actually recommended.
But for the rest of us who inhabit a much simpler universe – where people mean what they say and say what they mean – just for the record, the ACCC didn’t flag government underwriting of coal projects to “vindicate” the common sense of Nationals, as the resources minister Matt Canavan noted triumphantly on social media.
In fact vindication was almost entirely absent from the exercise. The ACCC’s report is a public invitation to governments to stop being complete dunderheads at taxpayer expense.
Sims also made it clear this week if governments want to compound the current problems with new ones, then the quickest way to do that is pick winners in the energy market.
Whether governments, state and federal, take up the ACCC’s kind invitation to stop indulging their nonsense and sending us all the bill is moot for now, although it’s clear that the Turnbull government in Canberra is very attracted to the roadmap, largely because it needs a fix on high power prices, and fast.
The Neg will either fly or die over the next month or so, but that mechanism is more about ensuring the national electricity grid is reliable and pollution is trending downwards than it is about lowering power prices.
The government has tried to mount a case that the passage of the Neg will reduce power prices, but that case is thin frankly, and the ACCC report helps call out the thinness of the case by pointing out all the actions that will need to be taken in order to address the problems sitting behind the inflated bills.
The Neg will go to state energy ministers in early August, and any one of them can sink it. Behind the scenes, stakeholders are trying to influence the final cut of the technical design, which will be circulated to the states in late July. There are some small bunfights playing out as decision day gets closer.
In recent months we’ve heard a lot from the stakeholders supporting the policy, but as we hit the home stretch of this debate, the opposing voices will get louder.
Over the coming weeks, the activist group GetUp, environmental groups and the solar industry will be trying to persuade either Victoria or Queensland to say no to the Neg, or to make support for it highly conditional. There will be TV advertisements running in Victoria and Queensland to keep the pressure up.
A number of stakeholders involved in backroom discussions about the policy for months think the ACT government – which has been the most volubly critical jurisdiction about the Neg – will be reluctant to sink it without one of the bigger Labor states in the no column.
It’s a big thing, after all, to sink a potential peace deal on climate and energy policy after 10 years of pitched partisan warfare, particularly if you are the smallest jurisdiction in the Coag energy council.
Amongst Neg opponents, there is frustration that the Victorian government – which faces its own election later this year – has been running dead on the flaws in the scheme, principally the lack of ambition in the emissions reduction target, and there are mutterings behind the scenes about mobilisation against the Andrews government if Victoria signs up to the Neg in August.
One of the Neg opponents is the Smart Energy Council, which is a solar group. Wayne Smith, the council’s government relations manager, told me this week the message to the state governments over the weeks between now and 10 August will be simple: you sign this deal guys, you own it. You can’t pass this off as anyone else’s policy.
“If the state governments sign on with a 26% target, then they own the target and its consequences,” Smith says. “They can’t then put their hands on their hearts and say they support renewable energy.”
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