Day 78: 'A fairer deal'
An introductory weekday newsletter from Schwartz Media. Counting the days since Australia had an energy policy.
Good morning and welcome to day 78.
Today in summary: Energy Minister Angus Taylor is preparing to push electricity retailers to cut prices by January, though he’ll be met with opposition on Wednesday; the federal government will change the tax treatment of oil drilling, raising A$6 billion; and SA’s oversupply of wind power is currently being wasted, but could be diverted to NSW if an interconnector project succeeds.
— Sophie
Today’s policy spin level: 💨💨💨
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Energy minister Angus Taylor will demand lower power prices at Wednesday’s roundtable with electricity retailers, but he faces a united force of power companies who will lobby for him to cut network charges and reduce solar panel subsidies. The federal government is pushing for a reduction by Jan 1st, and Taylor has threatened to use the “big stick” of divestiture if the sector doesn’t cut prices, saying:
“I have made and will continue to make my expectations of the energy retailers clear. We want a fairer deal for Australian families and small businesses. I will be emphasising that at the roundtable.”
The federal government hopes to raise an extra A$6 billion in tax revenue over the next decade by changing the tax treatment of some oil and gas projects. The changes are in response to a review of the petroleum resource rent tax (PRRT) regime released in early 2017, and the Guardian reports that the Morrison government has surprised the industry by planning to apply the changes to existing projects, not solely to new ones as was recommended in the review.
SA’s wind farms are having to curtail their production to avoid overloading the grid, but plans for a A$1.5 billion interconnector with NSW could take that excess power off SA’s hands. The interconnector policy was announced in October 2017 by Premier Steven Marshall, who was then in opposition, and in August Marshall announced A$14 million in funding to accelerate the project, with hopes it could be finished earlier than the goal of 2021-22.
Geopolitics
The US will give eight countries temporary waivers to keep buying Iranian oil after it imposes sanctions today, to avoid price spikes. On Friday, Secretary of State Mike Pompeo announced the planned exemptions without naming the nations, though they are set to be confirmed today. Turkey, India, South Korea, Japan, China and Iraq are expected to benefit.
The Commentariat
The government needs to show real leadership on the transition away from coal, not dig in, says The Guardian’s Katharine Murphy. Australia is already living through the first phase of disruption top the coal industry, with business and the financial markets having moved, and Murphy argues the Liberals aren’t moving fast enough.
“When it comes to Australia’s 8,000 coal workers and the communities that depend on those workers spending their incomes locally, governments can either pretend they can hold back the future, indulging inane, virtue signalling with Alan Jones about “fair dinkum” power while letting real people be crunched in the transformation, or they can act to make the shift as just as possible.”
Three more things
Despite WA mining most of the metals required for the production of lithium-ion batteries, Australia can’t compete with low-cost producers like China, Japan and South Korea, according to a report authored by the Chamber of Commerce and Industry WA and Australian Venture Consultants. But speakers at the launch of the report in Perth said WA “should aim to develop the precursor chemicals for battery cathodes, which would still extract a lot of value from the lithium-rich rocks miners pull out of WA dirt and bring plenty of high-paying white-collar jobs.”
China would prefer to reduce its reliance on coal in favour of natural gas, and the US is “swimming in the stuff”, according to the Chicago Energy Policy Institute’s Professor Michael Greenstone. Exporting natural gas to China would have the likely effect of reducing the US trade deficit, but Trump’s trade war is instead expected to preserve the deficit, as well as disrupt China’s efforts to solve its economic growth and population problems.
The UK could satisfy its energy requirements in summer without resorting to fossil fuels by 2050, and avoid damaging the energy market, according to a report from Aurora Energy Research. Renewable power could provide nearly 91% of the UK’s summer power by then, although gas power stations would need to remain online for winter.