Last week was a better one for the future of Australian energy as the Do-nothing Government finally got moving on domestic gas reservation and other ideas to resolve the energy crisis. However, one cannot say the same for Do-nothing Malcolm’s broader energy politics which looks very much like chaos. Let’s list recent developments:
- Do-nothing Malcolm declares the need for a carbon price before declaring no need for it the next day;
- Do-nothing Malcolm and Energy Minister Josh Frydenberg mercilessly attacked SA as the cause of the crisis owing to its development of intermittent renewables;
- Do-nothing Malcolm announced plans to fund and build a new coal-fired power station to address it, brandishing a lump of coal in Parliament, the private sector scoffs at the plan;
- Do-nothing Malcolm announced plans to invest billions in a Snowy Hydro expansion, undercutting his own message on SA and coal with not much more than a thought bubble;
- Do-nothing Malcolm announced that the Northern Australia Infrastructure Fund could fund a coal-fired power station, confusing us all even more;
- Do-nothing Malcolm offers concessional loans a new giant solar-thermal plant in SA, on his own argument making the energy crisis worse;
- Do-nothing Malcolm intervenes in the gas market with domestic reservation on the basis that it unfairly driving up gas and electricity costs, further undermining any push for coal;
- last week, Westpac bailed on funding the Adani coal mine, which is next to the Do-nothing Malcolm coal power station and a part of its rationale. Do-nothing has also recently offered to fund the coal mine with concessional loans. Over the weekend, Resources Minister MAtt Canavan describe Westpac as a “wimp”;
- behind all of it, Parallel PM Abbott, chief carbon price wrecker, proposes removal of all RETS, the very policies he put in place, and threatening a new Australian dark age of a government-owned and operated coal power grid, and finally
- soon we will see the release of the Government’s own final Finkel Report, which is likely to endorse a carbon price and accelerated renewable energy reform in contradiction with its own narrative.
Throughout, the Coalition has lurched from one brain-fart to the next, constantly getting caught on the wrong side of the debate, overreacting, and jumping to the other side. It’s narrative makes no sense, undermined by its own actions and political maneuvering, and its long term vision is blocked by past mistakes and political calculations.
This is the energy market we are talking about here, the foundation stone of modern civilisation, and the Coalition treats it like some personal piss pot. Surely it would have simply made more policy and political sense to long ago just embrace what John Howard did in the end, a simple market mechanism to aid energy transformation, which is just about what every stakeholder in the energy market now wants, including most of the Coalition’s business backers.
If Westpac is a coal “whimp” then the Coalition is a coal ………….(fill in the blank). Not that that registers with the MSM today, from Matthew Stevens:
The Minerals Council assessed Westpac’s initiative with anger of rare public intensity. The policy is “a textbook case of virtue signalling” according to Council chief executive Brendon Pearson.
“The bottom line is that one bank, with very limited exposure to the resources industry, is not going to lend to a mine project that it wasn’t asked to support in the first place. Observers will draw their own conclusions about the motivations for this announcement,” Pearson’s statement continued.
“While the immediate practical effect is likely to be negligible, the bank’s decision will be used by single issue activists to stigmatise the Australian coal industry and resources sector which collectively provided 14 per cent of Australia’s GDP growth over the last decade. The bank should reflect on that over coming weeks and months.”
Why would Westpc lend to an economically destructive white elephant anyway? And, if it doesn’t want to add to the risk of species extinction more widely, then that seems pretty prudent as well.
But no, it’s racism, says Resources Minister Matt Canavan:
Westpac’s new climate change policy would prevent it funding three other coalmines in Queensland’s Galilee Basin, despite the multi-billion-dollar projects meeting the efficiency standard outlined in new lending criteria, federal Resources Minister Matt Canavan says.
Piling pressure on the bank over its decision to rule out funding for projects in any new coal precincts, the Queensland senator said that under its new policy a mine in NSW could have lower-quality coal than a mine in north Queensland but would still qualify for financing.
“The Bank of NSW — aka Westpac — is directly discriminating against north Queensland,” Senator Canavan told The Australian.
“The … policy makes no sense from a climate change perspective because the consequence of such discrimination is to increase global carbon emissions.”
Just because.
Before ending, we can’t let Adam Creighton’s (who we like) weekend shocker go without a mention:
It seems ridiculous that as Australia becomes one of the largest LNG exporters in the world, local gas prices are surging and AGL Energy is even thinking about building an LNG import facility in the southeast.
But there’s not much government can usefully do about it. Demand for gas is surging globally and Australia’s huge supplies have been harnessed to meet it. Teething pains are inevitable as the gas market grows and becomes more international. No market is ever perfect.
…Imposing greater government control on the sector will put Australia in odd company. Less developed countries typically regulate their energy prices, according to recent analysis last year by Energy Quest, a consulting firm, and they have been dubiously effective. “Government interventions to reduce domestic wholesale gas prices are often unsustainable and have numerous negative side-effects in terms of economic, energy and environmental policy. The experience of the US and Canada suggests that a free market is a superior means of achieving sustainable low gas prices in a country with favourable geology like Australia,” they said.
The ACCC, which is in the midst of an inquiry into the gas sector, has explicitly advised the government against any sort of gas reservation policy. “A competitive market requires more gas supply and more sources of gas supply,” said ACCC head Rod Sims last year, adding that Australian governments had sacrificed industry and jobs to appease the environmental and farm lobbies.
The US had only a de facto reservation policy because the technology didn’t exist to export LNG when it was drawn up. Now it does and the US, with similarly huge gas production potential to Australia, is now exporting LNG too.
The US still has domestic reservation. So does Canada. That does not mean that they don’t export, only that they manage those exports to ensure low domestic cost. Today US LNG exports are tiny and even by 2040, it is projected to export only 18% of its total gas production. By contrast, Australian exports 80% of its gas production. We only need to reserve 4% of exports to fix our problems. 4%, Adam, not 100%. The US gas price is currently AUD4.34 versus AUD20 here.
Every energy exporter on earth has domestic reservation in one form or another – explicitly or via national oil firms – except Australia.
The ACCC has stuffed this up royally. It’s inquiry was pure Ivory Tower stuff and it also approved the Shell takeover of BG just eighteen months ago which concentrated 40% of east coast reserves in one producer. Was it right then? No.
Creighton’s not quite perfect market is a massive cartel gouging monster that has applied discriminatory pricing across the entire east coast. That’s market failure, mate, pure and simple. We should certainly debate how best to fix it but claiming its functional for anyone else does not pass the laugh test.
With arguments like these our Adam could apply for Coalition pre-selection!
