Day 100: 'A system of carrots and sticks'
An introductory weekday newsletter from Schwartz Media. Counting the days since Australia had an energy policy.
Good morning and welcome to day 100.
Today in summary: Julie Bishop says the Coalition should embrace the NEG; east coast customers are paying up to A$1600 more than they need to for power; and domestic gas prices rise above LNG netbacks, frustrating manufacturers.
— Sophie
Today’s policy spin level: 💨💨💨
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Ex-deputy Liberal leader Julie Bishop says the Morrison government should do a deal with Labor on the National Energy Guarantee to create a stable regulatory framework and encourage investment, reports the AFR. Labor has said it would work with the Coalition on the NEG, though Scott Morrison has shown no signs of re-embracing the policy. According to the AFR Bishop, who will address an EY conference in Sydney today, said:
"The generators need long-term certainty to give them confidence to make large-scale capital investments that will provide affordable and reliable energy, and with an appropriate level of return."
Consumer group Canstar says some customers are paying up to A$1600 more than they need to for power each year, though most customers think they have a good deal. Its survey of nearly 4000 households showed in Victoria, the gap between the best and worst deals for power means some households pay A$1657 more than they need to; in NSW, the gap was A$1082 and in SA it was A$1053. Canstar’s Simon Downes said:
“We’re shocked that almost two-thirds of those surveyed think they are on a good deal. We suspect people fall into the trap [of thinking] they’re on a great deal, particularly if their offer has saver or savings in its name.”
Domestic gas prices are currently higher than equivalent export prices, causing frustration for manufacturers on the east coast, reports the AFR. Gas in the south-east costs about $10 per gigajoule while the LNG netback - the price of Australian gas minus the cost of conversion and transport - is at $8 per gigajoule or lower. Energy market adviser Energy Edge’s Josh Stabler said:
“The day-in-arrears international netback prices are now lower than the domestic prices… However, as LNG prices are delayed by their physical nature, the impact on domestic outcomes is likely to be in the coming months.”
The Commentariat
Labor’s energy policy is politically clever and likely effective, but it needs to do more to support the transition away from coal-fired power, writes Frank Jotzo, director at the Centre for Climate Economics and Policy at ANU for The Conversation. The three-year notice requirement for coal plant closures is unlikely to work, he says.
“Without any guiding framework, coal power plants could close very suddenly. If a major piece of equipment fails and repair is uneconomic, then the plant is out, and operators may find it opportune to run the plant right until that point. It’s like driving an old car – it runs sort of OK until the gearbox goes, and it’s off to the wreckers right then. It is unclear how a three-year rule could be enforced.”
“One way to deal with this would be to draw up and implement some form of specific exit timetable for coal power plants… Such a timetable would need a mechanism to implement it, probably a system of carrots and sticks.”
Three more things
Electricity consultancy Arc Energy Group is looking to become an energy retailer. The Australian Energy Regulator is seeking submissions from interested stakeholders by Monday 24 December 2018.
AGL has become the latest energy company to develop a solar trading platform. The platform will allow customers to earn and sell tokens when they generate excess solar power. The trend comes as feed-in tariffs have been declining. AGL’s platform will also allow solar customers to sell tokens to their family and friends that don’t have solar panels to help them reduce their power bill.
Wind farms can slow down the winds in their wake for tens of kilometres, potentially reducing electricity production by their wind farm neighbours, according to a new US study. The researchers looked at two neighbouring wind farms in Texas and found their proximity could have cost up to US$2 million annually in lost electricity production.