Day 113: 'Stilted and uncertain progress'
An introductory weekday newsletter from Schwartz Media. Counting the days since Australia had an energy policy.
Good morning and welcome to day 113.
Today in summary: Batteries could force the closure of many gas peaking plants by 2025; the OECD says Australia won’t meet its Paris Agreement emission reduction goal; and Labor’s potential gas policy carries risk but also more certainty for industry.
— Sophie
Today’s policy spin level: 💨💨
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Batteries could make many gas peaking plants uneconomic by 2025 as the batteries dampen power price volatility, according to global energy consultancy WoodMackenzie. The Australian says about 7000 megawatts of gas capacity - or 13% of the national electricity market’s capacity - could be closed by 2025. WoodMac also said battery installations would need to be moved forward to meet Labor’s target of 50% renewables by 2030.
The OECD’s Economic Survey of Australia for 2018 says the country won’t meet the emissions reduction it committed to under the Paris Agreement, and the lack of stable and co-ordinated climate policy is creating problems.
“Climate-change policy is frequently a centrepiece of party-political platforms and political debate in Australia… This situation has not only made for stilted and uncertain progress on emission reduction and related innovation but has also contributed to problems in other areas, such as in energy supply”.
The Australian reports Environment Minister Melissa Price, who is in Poland today for the COP24 Summit, as saying the government is “committed to the Paris Agreement”.
The energy sector is more optimistic about a potential Labor government than the current policy vacuum, despite potential risks, reports the AFR. Labor’s gas policy - which could include stronger LNG export controls or a national gas reservation scheme - is a potential risk, though Credit Suisse's Saul Kavonic is quoted as saying:
"While these measures can sound tough, the ALP's gas policies may end up being seen as more manageable by the gas industry if they are developed in a consultative way through a proper regulatory development processes, rather than the fluid 'policy on the fly' approach that has been seen over the last 18 months.”
The Commentariat
A royal commission might be next after the government failed to pass its big stick legislation in the House of Representatives last Thursday, writes Katharine Murphy in The Guardian. Murphy says the Coalition could criticise Labor for preventing it from getting the ability to force power companies to divest assets, but then it runs “the risk of hanging a lantern over the fact you can’t implement your own agenda”.
“If things get desperate enough, if an escalation is required to conceal a setback, perhaps Morrison could pull on a royal commission into the power companies. The sector has wondered about the limits of whatever it takes between now and the next election, whether there are any limits.”
“Some remain firmly of the view that the government won’t go there, that it’s big stick or bust. But if you can’t get the practical outcome you seek, and disaster is bearing down, what, pray tell, does a thwarted government do next?”
In the Sydney Morning Herald, Tony Abbott says it’s “disappointing that the legislation was the victim of Labor's political game playing this week and hard-pressed consumers must now wait until February for Parliament to consider it.”
Three more things
Greg Combet-led investment manager IFM looks set to step up its push for asset owners to respond to the threat of climate change. The group is one of 441 other global investors that are signatory to a statement to governments calling on global leaders to achieve the Paris agreement goals, accelerate private sector investment into the low carbon economy, and commit to improve climate-related financial reporting. Chris Newton, head of responsible investment at IFM Investors, said asset owners had to rise to the challenge because governments were not.
Environment Minister Melissa Price is in Katowice, Poland this week for global climate talks and is already being asked to reconsider the decision to withdraw support for the multi-billion-dollar Green Climate Fund. Germany recently doubled its contribution to the fund to €1.5 billion, and while Australia has previously committed $200 million, Prime Minister Scott Morrison has signalled there will be no additional contribution. Germany’s board member on the fund, Frank Fass-Metz, told The Australian he hoped Australia would come back as a contributor.
New research of swinging voters in outer suburban areas has found participants place environmental issues in their top three or five concerns, depending on how much they connect environment issues to issues such as health and future economic prosperity. People included in the research mentioned water health, waste and recycling, and rapid urbanisation as their top environmental concerns.