Day 68: 'People-power policy'
An introductory weekday newsletter from Schwartz Media. Counting the days since Australia had an energy policy.
Good morning and welcome to day 68.
Today in summary: Victorian politicians step up the rhetoric against energy retailers, paving the way for today’s COAG Energy Council meeting to be little more than an exchange of barbs; APA Chairman Michael Fraser says the government’s big stick energy policy measures are a good recipe to destroy the electricity retail market; and battle lines are drawn over who gets to dominate demand response.
— Charis
Today’s policy spin level: 💨💨💨💨
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Victorian Energy Minister Lily D’Ambrosio has saved her biggest pre-election energy promise to last, with a new Victorian energy default offer. As per the Federal energy policy plan, the new legislated default offer would replace existing standing offers, and is in response to the Thwaites review of electricity & gas retail markets in Victoria.
Today’s COAG Energy Council meeting is shaping up to be a barb-fest on who can deliver customers the “lowest energy prices” using policy sticks and levers. The Victorian Opposition has announced a “people-power policy,” where it would tender out for electricity and gas from retailers in bulk and make it available to concession card holders. Shadow Minister for Energy David Southwick said:
“Lowest price wins, and that deal will be passed on to concession holders to ensure that they're paying the lowest price possible for their energy bills.”
Both the Victorian and Queensland governments seem unlikely to cut a deal, even on the reliability component of the NEG, in today’s COAG meeting. But we can certainly expect a lot more talk about “better deals”, “pushing prices down” and stopping the “rip-offs”.
ABC | Australian Financial ReviewAPA Group Chairman Michael Fraser isn’t holding out any hope for an agreement at today’s COAG meeting, telling shareholders at yesterday’s AGM energy policy in Australia was in disarray at both a federal and state government level, with consequences for the entire sector. Fraser told Fairfax Media:
“If you actually want to destroy retail competition and kill off the small retailers and make the generation sector uninvestable, then that’s a pretty good recipe that the government produced the other day.”
The Australian Energy Council is proposing a new rule on demand response that would keep some control of the emerging market in the hands of big power companies. The Australia Institute, the Public Interest Advocacy Centre and the Total Environment Centre want demand response rules to allow third-party aggregators to bid customers' capacity directly into the National Electricity Market in competition with generators. But the peak body representing large energy companies says its option would be cheaper given it would require less change to existing market structures. It would require third-party demand response aggregators to negotiate arrangements with customers' existing retailers and to bid their capacity into the NEM and settle trades via retailers.
Australian Financial Review
The Commentariat
The Morrison government is hoping that its threat of forced divestment will persuade voters it has a handle on the energy market, but it has little chance of implementing its policies, the Canberra Times editorialises today. The government’s planned investment in new generation energy is “almost comic” as there’s no hope of it being implemented before next year’s half-Senate election, the paper says.
“The same criticisms apply to the proposed "reliable power guarantee contracts" mooted by Morrison on Tuesday. It seems there is Buckley's chance and none a single one of these will be signature ready before the writs are issued for the poll. These weaknesses, shortcomings and policy failures have left Morrison and Taylor no alternative but to keep on bringing out the big stick.”
Carbon pricing is a tough sell for politicians, but international successes provide some hope it can be achieved, writes Barry G. Rabe, non-resident senior fellow at the Brookings Institution. Sustained programs in Nordic countries and British Columbia, Ireland, Iceland, and the cap-and-trade program in Northeastern US states show that carbon pricing can be implemented and carried through election cycles, Rabe says.
“There is no one singular formula that has guided this modest set of success cases and can easily be applied to fix the political challenges linked to carbon pricing. But all of them were guided by political leaders who found credible ways to link the imposition of price increases with immediate and tangible benefits through allocation of revenue generated by the policy… Perhaps most significantly, political leaders found ways to build coalitions across party divides over time rather than isolate carbon pricing as the pet product of a single party and elevate the risk of future reversal.”
Three more things
US President Donald Trump has authorised a Texas oil and gas company’s plan to drill for oil in the Arctic. Hilcorp Energy’s planned nine-acre artificial island in the Beaufort Sea, north of Alaska, is the first approved oil facility in federal Arctic waters. It needs further approvals before the island, which would have room for 16 wells and could extract between 60,000 and 70,000 barrels per day, can be built.
The rate of US coal plant closures could reach a record this year, according to a report by the Institute for Energy Economics and Financial Analysis. At least 36.7 gigawatts of coal-fired capacity will be retired from 2018 to 2024, with the potential for more to be announced, as renewables and gas-fired generation are proving cheaper and more flexible.
Brazil’s presidential election run-off on Sunday may result in a swing in energy policy, with far-right favourite Jair Bolsonaro planning to open up the market to more international oil drilling while left-wing underdog Fernando Haddad has talked about reimposing controls on fuel and gas prices and recommence using state-owned Petrobras as “the motor of development” to support local industry.
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