From Matthew Stevens on Grant King’s appointment as new Business Council head:
The King we see is the owner of a serious and absorbent intellect that is constantly focused on medium and long outcomes. He is the father of remarkable achievement at Origin, a power business that was born out of the shifting sands of national competition policy and that grew big enough to afford the expensive uncertainty of leading a $24 billion liquid natural gas project in Queensland.
“Public debate is a lot harder today,” King told The Australian Financial Review. “Taking good, long-dated public policy forward is more difficult than it was back when the NEM (National Electricity Market) was created (in 1998), for example…It was the case in the past that policy could be translated into real progress. The NEM is a prime example, a remarkable achievement for those that designed and then created the national electricity market. It is just that bit horrifying today how people feel like you can pull a few levers to get desired outcomes without understanding for a moment how the changes might skew outcomes.
“For example, adopting state-based renewables targets in an industry that has already over-invested in capacity and was already trading on a national industry basis makes no sense whatsoever. This process can only happen efficiently if there is alignment between the states and where there is a clear and agreed start and end point.”
…”Government likes to pick winners,” he noted. “It is part of [the] necessities of the electoral cycle. They like to be active and say, ‘We have picked another winner’. But they are not really good at it. Renewables are a case in point: It has been put through a boom-bust cycle by governments and their (public) need to be seen to respond. Activity has been enormous but it has not been sustainable. Subsidies have been offered and withdrawn, industries have crashed as rapidly as they have risen.
“The pull forward on solar (for example) through offering huge subsidies that are iniquitous in my view. Renters subsidised a home owner every time a solar panel went on a roof. That was government trying to pick winners. The underlying policy of decarbonisation is a particular and important public good. But in picking solar as a winner, the outcomes are distorted. The right path is to set a firm policy that aims to direct rational effective markets to the fulfilment of that public good.”
So, what can we take from this? First, there is nothing remarkable about King’s Origin except for its destruction of enormous shareholder value as it evolved from plain vanilla utility with reliable returns into a wildly swinging LNG wrecking ball. That story is one that should equip King to understand not just the failures of regulatory intervention but of regulatory inaction.
Second, it appears King is going to focus a lot on energy which may be no bad thing, so long as he does so in the public good and with an even hand. We don’t want our Grant picking winners either now do we?
Third, government energy policy has been awful, yes. Though I’ll note that the “pull forward” on solar would have happened anyway had “firm policy” been used to direct markets in the public good of decarbonsation. A carbon price would have delivered the same outcome, it would only have shifted who paid for it, as well as impacting the texture of winners and losers.
At least we appear to have a climate change friendly guy at the helm of the BCA. The concern I have is he will feel some lingering attachment to gas. After all, what Australian energy needs above all else is to break the east coast gas cartel of which Origin is a founding member.
