Via a roundly climate change skeptical Richo:
Malcolm Turnbull is running out of options as to what issue he might choose to fight the next election. This week he threw away what seemed to me to be his best option. By far the biggest issue in Australian politics today is electricity prices. Neither the Coalition nor Labor has a credible policy on where that electricity will come from, and a frustrated electorate grows angrier by the hour. Ordinary households have endured price rises of up to 50 per cent over the last few years and now look carefully at their heaters and the hours they can afford to keep them working. Small business is doing it really tough with electricity prices too. Whether it’s a café or a restaurant, a factory or a shop, these pesky electricity price rises are sending them broke. As for big business, smelting will soon be a lost industry to this country unless price rises can be curbed. Steel manufacturing is already in imminent danger.
The Opposition “policy”, if that is an appropriate term for a debacle, is to push for a 50 per cent renewable energy target by 2030. This is at best a fantasy and at worst a massive con job because it is so unrealistic and those championing it know that. Meanwhile, rather than come up with a bold alternative, the Turnbull government is paralysed by its internal processes, and can only stall and dilly dally rather than make a decision. The Finkel Report came up with the suggestion close to the PM’s heart. It recommended a clean energy target of 42.5 per cent and it is clear that the Liberal caucus won’t cop it and the Nationals won’t touch it with a bargepole. So, Malcolm Turnbull continues to fiddle while all around him burns.
On Monday, the PM rejected any suggestion of the government building even one coal-fired power station. That was a huge mistake. The Liberals will find it extremely difficult to campaign on minding the till. Labor may have had a tax and spend reputation but the Liberals have found a way to lose this advantage.
The Coalition must find a point of difference between themselves and Labor.
Sure it does. But building a fleet of coal-fired power plants that the private sector won’t touch isn’t going to do it. There are good reasons why they won’t build them. The old ones are making a fortune today as gas sets the price of electricity far above their break evens. But they’re going to get more expensive as carbon emissions are priced higher into the future.
As well, the lead time for construction is no faster than the great Snowy brain-fart. Indeed by the time you’d actually built new coal-fired power stations, grid level batteries will cheaper.
If you want to make a difference to power prices in the short term, short enough to impact the electoral cycle, then there is only one way to do it and that is to tackle the gas crisis. Recalling that gas sets the price of electricity in the National Electricity Market owing to where it sits in the wholesale electricity market bid stack. See Australian Energy Market Operator description below:
There is no way out of this without using a “sledgehammer”. The government’s gas reservation facility, the ADGSM, is too slow and weak to bring down prices enough.
If it wants to see results, the government will need to nationalise somewhere along the supply chain. There is no gas market anymore so quibbling about sovereign risk is pointless. Buying Santos and shutting one LNG train is one option. Buying (or expropriating) and force developing reserves in a national gas company with mandated rates of return is another. Either of these options would benchmark east coast prices. The simplest and quickest solution is just price controls.
It doesn’t create quite the bang of political difference that coal power would but it’ll actually work to lower energy prices so will aid the government.
