Day 53: 'By hot air balloon'
An introductory weekday newsletter from Schwartz Media. Counting the days since Australia had an energy policy.
Good morning and welcome to day 53.
Today in summary: Talk of business going it alone on energy policy has Federal Resources Minister Matt Canavan espousing the benefits of democracy; Australian manufacturers call for real policy action on gas exports, but could look to onsite solutions and efficiency in the face of relentless energy price rises.
— Charis
Today’s policy spin level: 💨💨💨💨💨💨
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Federal Resources Minister Matthew Canavan did little to calm an energy sector angered and frustrated over stalled energy policy, in a speech to industry executives on Thursday. The AFR reported plans for a Business Council-led group putting together a “package of measures to reduce greenhouse gas emissions, restore energy reliability and improve investor stability”. In response, Canavan said the corporate sector was not a replacement for democracy , telling the room it was a healthy thing to have debate and disagreement over policy, which would ultimately be decided at elections.
“I don’t think consensus is a guarantee of correctness - we had a consensus on the RET and it’s proven to be one of the worst energy policies adopted in this country, possibly the world.”
Canavan said more supply was the answer to gas price woes and blamed “anti-fracking voodoo science” for the high prices consumers are paying, taking aim at Victoria’s moratorium on onshore gas exploration.
“I do not care if the gas comes by pipe, by ship, by hot air balloon, as long as it’s the cheapest way of doing it. Whatever solution is determined, if Victoria continues to ban gas development in their state they will continue to pay export prices.”
Leading energy users from Australia’s manufacturing sector have urged more government action on getting gas prices down in the face of “shocking scarcity” of natural gas.
Incitec Pivot CEO Jeanne Johns, who hails from the US, told the AFR’s Energy Policy Summit the “strange situation” of Australian gas largely heading offshore for better prices left the explosives producer struggling to negotiate contracts and considering plant closures.
“I think that a country that is rich in natural resources like Australia should have affordable gas for Australians, whether those are Australian consumers or Australian businesses. It’s the heart of the economy.”
Industrial giant Dow Chemical argued more pipelines were the answer, but Telstra Energy head James Gerraty said “You could put blame in all sorts of places but it’s important for businesses like ours to take action and not wait for other people to solve our problems…it would be great if we had consensus on policy.”
A new report from US centrist think tank Third Way argues the manufacturing sector must step up its focus on energy efficiency and onsite action at manufacturing facilities.
“An astounding 64% of the primary energy consumed by US manufacturing is “lost” during transmission, power and steam generation, process heating, HVAC and lighting use, and other activities.”
To put the potential savings in perspective, manufacturing consumes 17.8% of energy used in Australia, behind electricity supply and transport which together account for 55%. Meanwhile, the Third Way report say that if the top five energy consuming manufacturing sectors in the US were their own country, they would rank 9th in the world in terms of total energy used.
Geopolitics
The Philippines is the latest country to be hit by rising oil and gas import prices, pushing up inflation. Instability in the country’s energy policy has stymied foreign investment in exploration. Philippine Senate Energy Committee Chair Sherwin Gatchalian is now pushing for more self sufficiency.
“It is high time for the government to launch a Drill, Drill, Drill program which will use these untapped oil and gas resources to pursue Philippine energy independence and pave the way for the country to become an energy exporting powerhouse.”
The Commentariat
With a gas supply crisis looming, writes the AFR’s Matthew Stevens, the biggest players are divided over the best way to get it to where it needs to be. It all comes down to forecasts on price.
“The days of $6/GJ are gone. It costs more than that to get it out of the ground. And costs are only going to rise as the second and third generation coal seams are introduced to the system.”
Three more things
The Legislative Council Select Committee on Electricity Supply, Demand and Prices in New South Wales wrapped up its final day of hearings in Sydney yesterday, and will report at the end of November.
Venture capital money is flowing into Chinese electric vehicle firms, according to Bloomberg NEF’s latest report on clean energy finance. Solar investment in China has slipped back recently as government action to cool off the country’s solar boom take effect.
James Murdoch is being tipped to takeover from Elon Musk as Chairman of troubled electric carmaker Tesla. Murdoch will soon step down from running 21st Century Fox after its entertainment assets were sold to Disney.
Financial Times
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