An introductory weekday newsletter from Schwartz Media. Counting the days since Australia had an energy policy.
|Dec 17||Public post|
Good morning and welcome to day 121.
Today in summary: Labor’s carbon trading scheme is expected to give large emitters a break; the ACCC says Australia needs gas investment to keep businesses running, and it’ll be watching domestic prices closely as they should start falling; and a NSW review has recommended electricity retailers be banned from trying to win back customers to encourage competition and better proactive pricing.
Today’s policy spin level: 💨💨💨
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Labor’s carbon emission trading scheme is expected to give relief to heavy-emitting businesses, reports the AFR. The scheme was announced in November but the full details are yet to be released. The AFR quotes representatives for BlueScope and Rio Tinto saying they hope and expect their businesses won’t face much higher carbon costs under the scheme.
The ACCC’s latest report on gas supply arrangements in Australia says the country needs investment to lower prices on the east coast, otherwise large gas users may end up priced out. The regulator’s chair Rod Sims said it’s “closely watching” to see if domestic gas prices follow export prices lower, after domestic prices rose with export prices in the past, but “the market response has been disappointingly slow” in gas production investment. Its next report will be released in April 2019.
“Given the difference between current domestic prices and production costs, we expect gas producers would have a strong commercial incentive to develop those reserves, sooner rather than later. The ACCC will, therefore, be closely monitoring and reporting on decisions made by gas producers on the timing of gas development.”
In NSW, the state’s Independent Pricing and Regulatory Tribunal (IPART) has recommended energy retailers be banned from trying to win back customers for six months after they switch providers, to help smaller retailers grow and put pressure on the ‘big three’ retailers to proactively offer better prices. That comes from its fourth annual review of the retail energy market, in which it also found that electricity retailers aren’t delivering an acceptable level of customer service to customers requesting a meter.
The COAG Energy Council meets in Adelaide tomorrow to review and push for progress in several important areas. Firstly, it could decide on legislation to implement the Retailer Reliability Obligation of the NEG. Chief scientist Alan Finkel will also be presenting an update on his plan for Australia to become a major hydrogen exporter.
Grattan Institute energy program director Tony Wood says it’s also worth keeping an eye on:
Further work required on the NEM to support reliability in the longer-term
How or if a default retail electricity market offer will be progressed, and if the Council is happy with industry work on a comparison rate to make it easier for consumers to get the best deal
AEMO’s Integrated System Plan could be endorsed for implementation with implications for existing market rules and investment
The Energy Security Board will table a final draft Strategic Energy Plan, intended to guide the operation and evolution of the energy markets. What does this mean in practice?
Wood says the ESB will also deliver its second “Health of the NEM” report to the Energy Council.
“The 2017 report diagnosed the NEM was not in the best of health, citing symptoms of increasing reliability risks, unaffordable bills and uncertain carbon emissions policy. It would be surprising if this year’s report was to recommend releasing the NEM from intensive care.”
Before the year is out, the Commonwealth Department of Environment and Energy should release the latest emissions projections. Key questions Wood says he’ll be asking are:
Is the electricity sector on track to deliver 26% reductions by 2030?
Is the economy-wide gap to a 26% target likely to be met with current policies?
What are the implications for a 45% target if Labor were to be elected in 2019?
Three more things
Governments at all levels are influencing outcomes in energy markets, according to the Australian Energy Regulator’s latest State of the Energy Market report. The report points to rising wholesale costs as behind increased electricity and gas prices. But there’s also a rising lack of trust by energy consumers in the sector, with only 39% of consumers trusting the retail market and 25% confident it works in their interests. New investment is being held back by a lack of stability and predictability in government energy policy, and market interventions, according to investors cited in the report. At the same time, the regulated networks are forecasting 16% lower revenues in current periods than in previous periods.
The Australian Renewable Energy Agency will invest A$4.2 million to help Santos run its petroleum operations in the Cooper Basin with solar rather than crude oil. Santos plans to use solar PV, backed by storage, to power its beam pumps, cutting consumption of fossil fuels and emissions.
Listed electricity network owner Spark Infrastructure is reportedly considering moving into renewable energy generation, as its transmission and distribution investments continue to be disrupted by emerging technology. The company has focused on acquisition and development for growth, and AFR sources say Spark’s now doing the rounds looking for new opportunities.