Energy Still Poses Policy Problems
There’s no easy answer to the energy policy tri-lemma.
Commentators in the press gallery seem to think that it’s simply a matter of agreeing to adopt a clean energy target (CET) as recommended by the Finkel Report and everything will be hunky dory.
But what renewable energy generators mean by a clean energy target is a continuation and, indeed, an increase in subsidies that will enable them to fund the storage that lets them sell despatchable power forward.
What energy retailers mean by a clean energy target is a price that encourages enough fossil fuel power generation to allow them to hedge power purchase contracts so they can offer stable long term prices to consumers.
What emission intensive manufacturers mean by a CET is a contract price that maintains their international competitiveness.
When Labor chides the government for not having an energy plan, as Mark Dreyfus did on the ABC’s ‘Insider’s programme on Sunday, they ignore the fact that the opposition has not resolved any of these problems either and the Labor states are adopting policies that pretend they do not even exist.
On Sunday Energy Minister Josh Frydenberg told Sky News that the government had to work within the current market constraints.
“If we are going to get all the thermal generation we need then we are going to have to look at all the options,” he said.
“Once we have all the certainty that we all want from our energy system then the market will be best placed to work out whether low emission high efficiency coal fired power, or gas or renewables with storage has a role to play.”
The government doesn’t have an answer to the key problems yet.
It’s waiting on a report from the Australian Energy Market Operator, due for release in early September, to give it some guidance on the approach be taken to the clean energy target.
However the government is looking for a solution that resolves the price, sustainability and emissions issues at the same time.
In the meantime a review of electricity and gas prices, released yesterday in Victoria, says that privatisation of power retailers has failed and advocates full scale intervention in the market to set energy prices.
It recommends that an independent umpire set a standard “no frills” price to keep costs in check, a move that could save the average household more than $200 a year.
Report co-author and former Labor Deputy Premier of Victoria, John Thwaites, said the government had gone down the wrong path with market deregulation and must step back in to control costs.
According to ‘The Independent Review of the Electricity and Gas Retail Markets in Victoria’, Victorian gas
and electricity prices have risen 200% over the past 15 years.
The idea of regulation of the retail market without a guarantee of long term contracts for despatchable power from wholesalers is likely to lead to market chaos.
Whether this is just a stunt in the current circumstances remains to be seen.
Subscribe to Inside Canberra