Day 106: 'Pre-emptive strike'
An introductory weekday newsletter from Schwartz Media. Counting the days since Australia had an energy policy.
Good morning and welcome to day 106.
Today in summary: Energy companies and business groups join together to lobby against the ‘big stick’ bill; the Morrison government doubles down on its criticism of the power companies, citing profit projections; and a report from Bloomberg says Australia’s power price increases have been driven by more global demand for coal.
— Sophie
Today’s policy spin level: 💨💨💨💨
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Energy companies and major business groups have renewed their attack on the Morrison government’s proposed big stick laws, with the draft bill going to the Coalition party room on Tuesday and introduced to parliament on Wednesday. Those against the policy include Australia’s three largest power companies AGL, Origin and EnergyAustralia, the big four banks, and business groups including the Business Council of Australia and the Australian Energy Council.
The AFR reported on the legal options available to the concerned retailers, including a “ pre-emptive strike based on the force and effect of the legislation” due to the impact on share prices.
The Coalition is also on the attack, with energy minister Angus Taylor putting out a statement on Sunday claiming that AGL, Origin and EnergyAustralia would almost double their collective profits to $2.87 billion in 2020, from $1.46 billion in 2015. Taylor said:
“It is no wonder the big energy companies are pushing back against the big stick legislation we are introducing to parliament. They have been taking record profits from the wallets of hardworking Australians for years - and they don’t want it to end.”
Origin said the data Taylor used was cherry-picked and “there should be nothing wrong with companies earning a fair return on their investment”; AGL said the proposed laws would raise prices further.
The Morrison government also said it was launching “a new phase” of its campaign to cut power prices, and said retailers have heard its calls and reduced prices. However, The Australian reported the government has failed to deliver widespread cuts.
Rising Australian energy prices have been driven by increased coal prices due to higher offshore demand, according to a report by Bloomberg. The cost of black coal, which accounts for 54% of generation for the energy mix on the east coast of Australia, has increased because of increased demand from China, pushing up wholesale power prices which account for about one-third of household power bills. The report’s author Ali Ashgar said:
“Since black coal makes up such a large portion of the NEM’s energy mix, this change in the cost of coal generation is perhaps the most important reason behind the 60-100 per cent hike in average wholesale power prices over the last two years.”
The Commentariat
Keith Orchison at This is Power writes that media coverage of climate change lacks understanding of the complexity of cutting carbon emissions without damaging the economy. He cites a paper from the Energy Policy Institute of Australia released today which says Australia should pursue '“industrial-scale, fit-for-purpose, low carbon energy solutions.”
“There’s a line in the EPIA paper that I would like to have seen on placards at the ‘schools’ strike’ rallies around the country: “The climate doesn’t mind how you clean up energy systems so long as you do.” In other words, that technology neutrality should be the over-arching principle of energy policy – something that, despite some of the political rhetoric, it certainly isn’t in Australia.
In my view, we owe it to our kids to do so because, if we don’t, by 2040 they will be in the front line of footing the cost (including damage to the economy).”
Three more things
Conservative Canadian think-tank the Fraser Institute has dropped Australia’s eastern states further down its ranking of the least attractive jurisdictions for oil and gas investment. The Institute surveys oil and gas executives on issues including tax rates, regulatory obligations, uncertainty over environmental regulations, as well as concerns over political stability. It now ranks Tasmania, NSW and Victoria among the ten worst alongside Venezuela, Iraq and Indonesia.
Meanwhile, international conglomerate GE says Australia’s inadequate electricity infrastructure means new renewable power could be going to waste. GE plans to build the world’s largest onshore wind turbines in Australia, but the group’s global head of renewables, Jérôme Pécresse, told Fairfax more investment in the grid would be required to enable the oncoming increase in renewables. The view is in line with recent comments by AEMO chief Audrey Zibelman.
Renewable generation in the NEM has reached a new record high, with solar capacity connected to the NEM up by more than 50%, according to the Australia Institute’s latest National Energy Emissions Audit. In the year to October, grid-connected renewables supplied 16.5% of total electricity, of which wind and solar supplied 8.2% and hydro 8.3%. It also says Snowy Hydro is now using its pumped storage almost every day, for the first time in almost 10 years.