Day 115: “Radically different paths”
An introductory weekday newsletter from Schwartz Media. Counting the days since Australia had an energy policy.
Good morning and welcome to day 115.
Today in summary: the Auditor-General says NSW mishandled the A$16.8 billion leasing of Ausgrid; policy instability is preventing a competitive and efficient energy market, according to the Australian Energy Regulator; and NSW launches plans for 24 pumped hydro stations.
— Sophie
Today’s policy spin level: 💨💨💨
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An Auditor-General’s report on the A$16.8 billion lease of Ausgrid in 2016 says the NSW state government didn’t adhere to its own guidelines on handling an unsolicited proposal, and "did not assure value for money was optimised" in signing over a majority stake in the state’s electricity distributor. The report says the government began negotiations with bidders IFM Investors and AustralianSuper too quickly and disclosed an acceptable price too early, and didn’t establish there could be no other viable bidders.
The AFR quoted a spokesperson for the Department and Premier and Cabinet as saying it “disagrees with some of the Auditor-General's findings” and the proposal “met all the unsolicited proposal criteria”.
The first Australian Energy Regulator report on the national electricity market has found that high prices have been driven by less low-cost coal and gas, not short-term behaviour by large power generators, while policy instability is preventing an effective competitive market. The report says:
“There is however considerable investment in new wind and solar generation on the horizon, so it may be that these potential barriers to entry are not having as significant an impact on the sector as suggested during our enquiries. Nevertheless, we do consider the lack of consistent policy signals to support investor confidence is one of the biggest threats to competition and efficiency in the NEM over the long term.”
The NSW state government has launched a plan for 24 pumped hydro projects - with total generation capacity of about 7,000 megawatts - to support the shift to renewables. It will spend about A$55 million on pre-investment studies, after whittling 65 private sector proposals down to 24 for further investigation. Combined, the projects could meet half the state’s peak demand on hot days and provide triple the amount of generation capacity from the proposed Snowy 2.0 upgrade.
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The Commentariat
Australia and the US are on “radically different paths” when it comes to energy, with Australia facing an energy crisis while the US reaps the benefits of a boom, writes Professor Simon Jackman, chief executive of the United States Studies Centre at the University of Sydney, for the AFR.
“It doesn't have to be this way. In fact, it wasn't this way only a few years ago. Indeed, Australia and the US have in many ways reversed their energy situations over the past decade.
As has become all too obvious, resource abundance will get the Australian economy only so far. Increasing energy supply is not enough. Institutional arrangements and property rights, market competitiveness, the infrastructure that gets energy from producers to consumers and regulatory and policy settings all play critical roles. The architecture of Australia's energy markets requires reform, if not transformation.”
Geopolitics
At the UN climate talks in Poland, Australia was the only country to join a US government-run event promoting the use of fossil fuels “as cleanly and efficiently as possible”. The Guardian quotes Patrick Suckling, Australia’s ambassador for the environment, as saying:
“Australia has a technology-neutral approach to emissions reduction. It’s important that we do so, we need to pull every lever to reduce emissions. We need to be open to innovation and new technologies providing multiple pathways for energy security and emissions reductions.”
Three more things
The board of Snowy Hydro will reportedly meet today to consider whether to approve the A$4 billion Snowy 2.0 expansion. Snowy has consistently said the board will make a decision on the project, which still requires funding and environmental approvals, this month. The AFR reports this is now looking unlikely this side of Christmas. Energy Minister Angus Taylor told the AFR the government would consider its position on the project after the board’s decision.
The Federal Government’s “Powering Forward” advertising campaign cost taxpayers A$9.4 million last financial year, despite the National Energy Guarantee it promoted being dropped in August. The government continues to advertise its energy policy measures online, including the “big stick” reforms that have yet to pass through Parliament.
High international coal prices are expected to boost Queensland’s revenues in the current financial year, with stronger prices for both coal used to make steel and thermal coal driving royalties over A$5 billion in the current financial year - up to A$500 million more than expected. Thermal coal has risen over US$100 per tonne, from the expected US$89 per tonne.