Day 86: 'Chilling investment'
An introductory weekday newsletter from Schwartz Media. Counting the days since Australia had an energy policy.
Good morning and welcome to day 86.
Today in summary: Energy companies say the ‘big stick’ of price caps could be unconstitutional; Victoria’s Liberals would underwrite 500MW of new power; and COAG asks for feedback on its metrics for determining whether Australia’s power is affordable, competitive and secure.
— Sophie
Today’s policy spin level: 💨💨💨💨
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Energy companies have come out swinging against the government’s ‘big stick’ threats of divestment and price caps. The Australian Energy Council, which lobbies for 22 major power companies, released legal advice from Ashurst saying the enforcement powers mooted could breach Australia’s constitution. In a submission the AEC made to Treasury, it said those powers would:
"add further uncertainty, chilling investment in energy infrastructure that is so crucial to delivering lower prices to consumers.”
Energy Minister Angus Taylor pushed back, telling the Guardian:
“it is unsurprising that the big energy companies are desperate to avoid any measures that would see a better deal for Australian families and businesses.”
Victoria’s Liberal Party has made an election promise to underwrite construction of 500MW of power, a plan which has received mixed reviews. The state’s largest power companies say government intervention could stifle private investment, the Age reports, while the Clean Energy Council told the AFR the commitment is “modest” though it’s confident the tender process would be won by renewables, not gas or coal. Experts have also cast doubt on the Frontier Economics modelling cited by the Liberals to support the plan.
The COAG Energy Security Board - which is currently developing the Strategic Energy Plan for the COAG Energy Council - is asking for stakeholder input on its proposed metrics to measure whether the plan’s objectives are being met. Those objectives include energy becoming increasingly affordable, markets operating securely and competitively, and the sector cutting emissions while ensuring reliable supply.
The ESB’s proposed metrics include reduced spending as a percentage of disposable household income, increased transparency in contract markets and system-wide outages under a certain percentage every year.
Coming up
At 11am today the International Energy Agency's World Energy Outlook 2018 will be released. It’s an annual review and projection of global energy markets, emission reductions and likelihood of meeting the Paris targets.
The Commentariat
The NSW state government’s plan to upgrade transmission links to improve the state’s power grid and accommodate renewable energy - which it announced yesterday - is uncoordinated interference, writes Matthew Stevens for the AFR.
“Where is the business case that says a South Australian interconnector is the appropriate answer? It has consistently failed the net benefits test before and the uncertainties over baseload generation up and down the east coast can only have made that case more fragile.”
Jim Molan, Liberal Party senator for New South Wales, argues that Australia should explore nuclear energy. Molan says the rest of the world is embracing nuclear, and Australia is the only OECD nation to prohibit nuclear by legislation, but embracing it could encourage economic growth and reduce energy dependence.
“It is our responsibility as legislators to examine every available option on its merits — to be “technology neutral” — and consider Australia’s immediate and future energy needs.”
Three more things
Natural gas could cancel out emissions reductions made by using renewable energy, reports the Guardian Australia. LNG production is emissions-intensive and demand is booming, with Australian exports forecast to increase from A$31 billion in 2018 to A$48 billion in 2020.
Atlassian billionaire Mike Cannon-Brookes has investments in the Solar Asset Fund and plans to use his lobby group, Fair Dinkum Power, to make renewable energy a major election issue. Cannon-Brookes says Australia reaching 200% renewable energy:
“would get us both a lower cost of power in the country, and also a huge industry in terms of exporting power to the rest of the world.”
Energy firms could save US$73 billion in five years by using newer technology, according to energy consultancy Wood Mackenzie. US$12 billion a year could be saved by buying technology which would make drilling faster and more accurate, and firms could also save by using cloud computing, digitalisation and automation.