Day 121: 'The market response has been disappointingly slow'

An introductory weekday newsletter from Schwartz Media. Counting the days since Australia had an energy policy.

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.

— Sophie

Today’s policy spin level: 💨💨💨

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  1. 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.

  2. 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.”

  3. 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.

Coming up

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.

Day 120: 'Misses the critical point'

An introductory weekday newsletter from Schwartz Media. Counting the days since Australia had an energy policy.

Good morning and welcome to day 120.

Today in summary: the AER has released its rate of return decision for 2018, and the networks aren’t happy; the CEFC says its investment in renewable technology will continue after the government changed its mandate; and Labor announces plans for an environment protection agency.

— Sophie

Today’s policy spin level: 💨💨💨

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  1. The Australian Energy Regulator has released both its final decision on its rate of return review and its final report on changes to its regulatory tax approach. On the rate of return, the regulator has released its new rate of return instrument, which is now legally binding after legislation passed last week. It has allowed a slightly lower overall indicative rate at 5.36% for 2018 from a previous 5.76%.

    On tax, the AER says there is a gap between the regulatory allowance and the tax actually paid by regulated networks; it recommends changes to depreciation which will “narrow the gap, but not close it entirely”.

    In a media release this morning, Andrew Dillon, chief executive of Energy Networks Australia, said the rate of return decision was “disappointing” and “not in the long-term interests of consumers”.

    “The rate of return decision misses the critical point that a key part of lowering long-term power prices is strategic investment in the grid, increasing the risk that timely investment will not occur.”

  2. The Clean Energy Finance Corporation says the government’s new mandate doesn’t change its plans to invest in renewables. On Friday, energy minister Angus Taylor and finance minister Mathias Cormann issued a statement saying the government had directed the CEFC to “prioritise its investments with a view to support increased reliability and security of electricity supplies” and continue to focus on emerging clean technologies to reduce the risk of it crowding out private investment.

    CEFC chief executive Ian Learmonth said its investment pipeline includes large-scale pumped hydro, household and grid-scale batteries and synchronous condensers, and:

    “importantly the new mandate does not prevent the CEFC from continuing to invest in intermittent renewable energy such as wind and solar, after the CEFC has considered effects on the reliability and security of the grid.”

  3. If elected, Labor would create a national environment protection agency and pass a new environment act, leader Bill Shorten announced at his opening address of the party’s national conference in Adelaide on Sunday. His speech was interrupted by protestors urging Labor to oppose the Adani Carmichael coalmine.

    The Guardian | SMH | AFR


UN climate change talks in Poland have ended with an agreement on rules to implement the Paris commitments. The SMH reports that under the rulebook, Australia will face pressure to adjust its targets upwards by 2020.

The Commentariat

Bill Shorten was “smart on populism” at the ALP’s national conference yesterday, writes Katharine Murphy for The Guardian.

“When progressive preoccupations featured – like climate change – they were refracted through a materialist lens. A booming renewables sector meant Australian jobs, and manufactured products. Batteries, Shorten reflected at one point, were the “bridge that turns renewable energy into the conservative solution”, and they could be made in Australia, given we possessed all the necessary raw materials.

When the post-material constituency forced themselves on Sunday’s proceedings, as anti-Adani protesters stormed the stage and rallied in significant numbers outside the event, Shorten wondered, just who were they helping?”

Three more things

  • SIMEC Zen Energy plans to submit two of its renewable energy projects for funding under the government’s Underwriting New Generation Investments Program, reports The Australian. The Sanjeev Gupta-backed energy group is also considering an IPO to help raise the capital it needs for its planned expansion in Australia. The company plans to include its Cultana solar farm project in South Australia’s Upper Spencer Gulf, along with a new giant battery to be installed in the state’s Port Augusta, in its pitch to the government.

  • Global asset management firm Capital Dynamics is talking up large-scale batteries in the US as it seeks to tap into solar power opportunities made more lucrative by falling costs. The company sees load shifting as the major engine for the improving commerciality of grid-scale solar, however is not yet planning to invest in Australian renewables because "the returns are not supporting that level of risk”.

  • California plans to make its entire fleet of 12,000 transit buses carbon free by 2029 following a vote by the California Air Resources Board. The move is the first of its kind in the US and comes as California seeks to meet its greenhouse gas emission reduction target of  80% below 1990 levels by 2050. 40% of California’s emissions currently come from the transport sector.

Day 117: 'Hand in glove' with the US

An introductory weekday newsletter from Schwartz Media. Counting the days since Australia had an energy policy.

Good morning and welcome to day 117.

Today in summary: ExxonMobil and BHP will announce a new gas field in Victoria, potentially preventing future shortages; the AEC says a reference price for power would be better for customers than a default market offer; and the government announces a funding increase for the AER and ACCC given their extra workload.

— Sophie

Today’s policy spin level: 💨💨💨

Please don’t keep Australian Energy Daily to yourself. Forward this email to your colleagues and encourage them to sign up for free here.

  1. ExxonMobil and BHP will today announce a new gas field to be developed off the coast of Victoria, as Jemena opens the first part of its new gas pipeline in the Northern Territory, which will be the first to connect NT with Queensland. The SMH reports that ExxonMobil and BHP made a final investment decision yesterday on the Bass Strait gas project, and it aims to be producing by 2021, which would help Victoria avoid a projected major gas shortage in 2022.

  2. Retailer lobby group the Australian Energy Council has commissioned a report showing that most consumers would benefit more from a reference price than a default market offer. The report, by Oakley Greenwood, will be fully released tomorrow. The AEC says it shows that a DMO would see both bad and really good offers disappear from the market, meaning:

    “customers who are disengaged benefit slightly, at the expense of those who have engaged in the market”, while “a reference price aims to make it easier to switch to better offer, incentivising customers to engage in the market.”


  3. The Morrison government says it will provide the Australian Energy Regulator with an extra A$23 million over five years, and the ACCC with A$28 million over seven years, to “help lower power prices and ensure customers get a fair deal”. The last funding boost the AER got was in July 2017, where it was allocated an extra A$67 million over four years; the ACCC warned in October that its budget was climbing in response to increased demands from federal government.


In Poland, Environment Minister Melissa Price has told a UN summit that Australia is "committed to the Paris Agreement" and “must play its part”.

Negotiations are currently underway to create a rulebook for implementing the Paris commitments, and Australia has been criticised for “working ‘hand in glove’ with the United States to block progress”.

The Commentariat

In the AFR, John Roskam - executive director of the Institute of Public Affairs - writes that political crises in Britain, Europe and the US are because “on many issues the politicians and the public no longer agree with each other, and parties have no way of responding to this change”.

“Despite what Liberal and Labor politicians believe, energy and climate change policy doesn't lend itself to a managerialist fix either. The choice between lower carbon emissions and lower energy prices is ultimately determined according to the principle of what subjective value is to have priority.”

Three more things

  • Australia’s on track to miss its Paris target of a 26%-28% emissions cut by 1.1 billion tonnes of carbon emissions, according to consultants Ndevr Environmental. Ndevr produces data like the government’s NGGI quarterly reports but excludes land use data, which it says is unreliable. Managing director Matt Drum said:

    “If Labor come into government we can’t afford a policy vacuum. It’s looking grim. We need policy levers and we need them quickly.”

  • A new 10% royalty should apply to all Australian offshore gas projects, argue the authors of a new report from progressive think tank the McKell Institute. The tax would deliver an estimated A$2.8 billion a year to the government. The report’s authors say this would help fix the “broken” petroleum resources rent tax which is not delivering the government the returns it forecast. The report also calls for extractive companies to be forced to disclose all payments to all levels of government.

  • The International Energy Agency says the global oil market could move into deficit more quickly than expected next year as crude prices hover around US$60 per barrel. In November, the IEA expected the market to remain in surplus in 2019, however it now expects a deficit by the second quarter based on OPEC’s agreement with Russia and other producers to cut output from January and Canada’s decision to cut supply.

Day 116: 'Unaddressed and therefore unresolved'

An introductory weekday newsletter from Schwartz Media. Counting the days since Australia had an energy policy.

Good morning and welcome to day 116.

Today in summary: Snowy Hydro’s board approves Snowy 2.0, now it’s down to the politicians; the Morrison government will announce its planned energy underwriting, possibly including fossil fuels; and household power bills rose as much as 22% in the past year, as more customers go onto hardship plans.

— Sophie

Today’s policy spin level: 💨💨💨💨

Please don’t keep Australian Energy Daily to yourself. Forward this email to your colleagues and encourage them to sign up for free here.

  1. Snowy Hydro’s board has approved its proposed 2.0 pumped hydro expansion, subject to approval from its sole shareholder - the federal government. The upgrade will add 2000 megawatts (MW) of generation to its existing 4,100 megawatts and the system will act as a battery, pumping water uphill when renewable power is cheap and releasing that energy when needed. Snowy says the project can provide enough power for three million homes for a week.

    In emailed statements to multiple media outlets, energy minister Angus Taylor said:

    “The government will consider this project on its merits — I’m not going to pre-empt that process. As we’ve always said, the Snowy 2.0 needs to stack up. We will take whatever time is required to do the necessary due diligence and go through our usual processes to ensure we make the right decision.”

    The Australian | The Guardian | Reuters

  2. The Morrison government is pushing forward with its plan to underwrite power generation, and won’t rule out supporting existing coal and gas plants. Energy minister Angus Taylor is to launch the scheme in Tasmania today, and power producers will have until January 23rd to register their interest. The SMH reports the cost of the scheme will be uncapped, while the AFR reports both the cost and the generation capacity will be capped but the limits won’t be made public for competition reasons.

    AFR | SMH

  3. The Australian reports that household electricity bills rose as much as 22% in the past year and more customers went into hardship programs. That’s based on the Australian Energy Regulator’s annual retail energy market report, which is not yet publicly available. The Australian says that in 2018, customers in SA, NSW and the ACT had standard offer price increases of 21.1% to 22.1%, while prices for the more common market offers increased as much as 22.6% in the ACT and 11.5% in NSW.

The Commentariat

The AFR’s Matthew Stevens writes that the government - and particularly Angus Taylor - has had a tough week, following the AER’s report on the electricity market - which found policy instability is preventing effective competition and large generators haven’t driven prices up.

“If Taylor, who really is an energy economist of some note, had more of a free hand to take a strategic approach to our trilemma then I am pretty sure we would see a more comfortable, productive Energy Minister.

To be clear here, everyone but everyone says Taylor knows what he is talking about. They know, too, that the nation needs a cogent strategy that, at once, embraces the aligned challenges of renewable energy and climate, encourages and embeds new competition, and recovers and fosters system security.

In the end, the government waves big sticks to solve problems that don't exist while the real issues of the moment stand unaddressed and therefore unresolved.”

Three more things

  • The Clean Energy Finance Corporation has invested A$100 million in Infrastructure Capital Group’s renewable energy fund. The fund is focused on proven large-scale wind and solar power, waste-to-energy, large-scale battery storage and pumped hydro. The CEFC says institutional investors are increasingly keen on environmentally-responsible opportunities as greater scrutiny is being placed on climate risks in their portfolios.

  • Large mining companies are stepping up a push for subsidies to support carbon capture and storage (CCS) technology. Lobby group the Global CCS Institute wants the experimental industry to gain scale quickly, arguing CCS should be seen as “necessary and doable”. The International Energy Agency estimates only 30 million tonnes of carbon are currently being captured, compared with the 33 billion tonnes the world is emitting. Former Vice President and climate activist Al Gore told Axios getting scale made CCS an “extremely improbable solution right now” in the absence of a major breakthrough.

  • The US is unprepared for a “catastrophic” power outage, according to a new report from the President’s National Infrastructure Advisory Council. The report considered readiness for an outage that lasted weeks to months or years, affecting large swathes of the country. It found existing national plans would not be sufficient to deal with such a scenario, and “significant action” was required to prepare for it. Among its recommendations was conducting a series of regional catastrophic power outage exercises to identify second and third-order cascading failures of an outage over time.

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Day 102: 'Crying out for certainty': More lobbying for a revival of the NEG, this time from state governments; Labor’s climate policy will reintroduce carbon trading for Australian businesses; and the UN says Australia won’t meet its Paris targets.
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