The energy minister, Josh Frydenberg,
says the looming Finkel review will recommend a new policy signal
driving investment in a “broad suite of generation capacity”, which, if
implemented, will restore confidence in Australia’s electricity sector.
But he also foreshadowed a hard road ahead. Referencing the climate wars of the past decade, noting that energy policy had “destroyed two prime ministers and one opposition leader”, Frydenberg predicted “big battles” both within the Coalition – and potentially within Labor – and externally with stakeholders, as the government seeks to land a new policy.
Frydenberg told an economic thinktank in Canberra on Wednesday the final Finkel review, which will be presented to the Council of Australian Governments next Friday, would help “land some sort of position to create that signal for investment in a broad suite of generation capacity”.
He said there was no investment strike on renewable energy, that the sector was prospering “and that needs to continue”, but he said the market needed a signal to kickstart new investment in thermal generation to help stabilise the grid.
“I think that will be very important in restoring confidence,” the minister said Wednesday.
Frydenberg’s comments are consistent with a widespread expectation among key industry groups
that the chief scientist will use his looming report to recommend the
government adopt a new low-emissions target, which would work in
practice as a technology-neutral renewable energy target (RET).
John Howard floated a similar policy in 2007, a regulation that required that a percentage of electricity be generated annually from “low-emissions” sources. In 2007, that was defined as emitting fewer than 200kg of greenhouse gas per megawatt of electricity generated.
The Turnbull government has already ruled out adopting an emissions intensity trading scheme for the electricity sector, largely because of internal objections by Coalition conservatives.
It is unclear whether the Coalition party room would accept a technology-neutral RET as an alternative policy mechanism.
It is also unclear whether Labor would give such a mechanism bipartisan support and investors will remain on the sidelines as long as they fear another outbreak of the climate wars between the major parties.
Frydenberg told the Committee for Economic Development of Australia that Finkel was looking at a mechanism to “incentivise investment”.
“We need the right mix,” the minister said.
Frydenberg said energy was a vexed area of public policy and the federal government lacked a “silver bullet” to fix the current problems, because that would require complete cooperation with the states – but he said the government had to get it right. “We cannot afford to fail.”
As well as using the Finkel process as a springboard to create a new investment signal, the minister said he was also interested in pursuing the issue of network costs because they impacted on electricity pricing, making up 50% of a power bill. “They went up between 2007 and 2013 by about 100%.”
Frydenberg said he wanted to get rid of limited merits review to the Australian Competition Tribunal. “I have said as the commonwealth minister, I don’t want to see limited merits review.
“You don’t have it in the telco sector, you don’t have it in the water sector, the air services sector, or for Australia Post.”
He said he was supported in this view by the South Australian and Victorian government but not the Queensland and New South Wales governments. “They are conflicted.
“They own either all or some of these networks, so they want to pocket the extra money they get from this limited merits review process at the expense of consumers.
“So I am looking to drive some significant reform to that through Coag and the next meeting of energy ministers.
“If we can get certainty, more investment in generation, lower gas prices and fix up the limited merits review process then I think that will help in the short, medium and long term.”
The minister was also asked about Donald Trump and the possible US withdrawal from the Paris climate accord.
Frydenberg said what Trump did was a matter for him but he noted the emissions intensity of the US economy was at its lowest level in 20 years. “It is moving in the right direction,” he said.
He said more than 140 countries had ratified the Paris agreement and “Australia takes our obligations to agreements we sign up to and ratify very seriously.
“Australia has commitments and we are sticking to those. I think we can meet our targets and we are making good progress in doing so.”
Earlier on Wednesday, the employment minister, Michaelia Cash, told a Senate estimates hearing Australia’s national interest was best served if Trump stayed the course with the Paris deal.
A decision is expected out of the US this week.
But he also foreshadowed a hard road ahead. Referencing the climate wars of the past decade, noting that energy policy had “destroyed two prime ministers and one opposition leader”, Frydenberg predicted “big battles” both within the Coalition – and potentially within Labor – and externally with stakeholders, as the government seeks to land a new policy.
Frydenberg told an economic thinktank in Canberra on Wednesday the final Finkel review, which will be presented to the Council of Australian Governments next Friday, would help “land some sort of position to create that signal for investment in a broad suite of generation capacity”.
He said there was no investment strike on renewable energy, that the sector was prospering “and that needs to continue”, but he said the market needed a signal to kickstart new investment in thermal generation to help stabilise the grid.
“I think that will be very important in restoring confidence,” the minister said Wednesday.
John Howard floated a similar policy in 2007, a regulation that required that a percentage of electricity be generated annually from “low-emissions” sources. In 2007, that was defined as emitting fewer than 200kg of greenhouse gas per megawatt of electricity generated.
The Turnbull government has already ruled out adopting an emissions intensity trading scheme for the electricity sector, largely because of internal objections by Coalition conservatives.
It is unclear whether the Coalition party room would accept a technology-neutral RET as an alternative policy mechanism.
It is also unclear whether Labor would give such a mechanism bipartisan support and investors will remain on the sidelines as long as they fear another outbreak of the climate wars between the major parties.
Frydenberg told the Committee for Economic Development of Australia that Finkel was looking at a mechanism to “incentivise investment”.
“We need the right mix,” the minister said.
Frydenberg said energy was a vexed area of public policy and the federal government lacked a “silver bullet” to fix the current problems, because that would require complete cooperation with the states – but he said the government had to get it right. “We cannot afford to fail.”
As well as using the Finkel process as a springboard to create a new investment signal, the minister said he was also interested in pursuing the issue of network costs because they impacted on electricity pricing, making up 50% of a power bill. “They went up between 2007 and 2013 by about 100%.”
Frydenberg said he wanted to get rid of limited merits review to the Australian Competition Tribunal. “I have said as the commonwealth minister, I don’t want to see limited merits review.
“You don’t have it in the telco sector, you don’t have it in the water sector, the air services sector, or for Australia Post.”
He said he was supported in this view by the South Australian and Victorian government but not the Queensland and New South Wales governments. “They are conflicted.
“They own either all or some of these networks, so they want to pocket the extra money they get from this limited merits review process at the expense of consumers.
“So I am looking to drive some significant reform to that through Coag and the next meeting of energy ministers.
“If we can get certainty, more investment in generation, lower gas prices and fix up the limited merits review process then I think that will help in the short, medium and long term.”
The minister was also asked about Donald Trump and the possible US withdrawal from the Paris climate accord.
Frydenberg said what Trump did was a matter for him but he noted the emissions intensity of the US economy was at its lowest level in 20 years. “It is moving in the right direction,” he said.
He said more than 140 countries had ratified the Paris agreement and “Australia takes our obligations to agreements we sign up to and ratify very seriously.
“Australia has commitments and we are sticking to those. I think we can meet our targets and we are making good progress in doing so.”
Earlier on Wednesday, the employment minister, Michaelia Cash, told a Senate estimates hearing Australia’s national interest was best served if Trump stayed the course with the Paris deal.
A decision is expected out of the US this week.
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