The AFR hasn’t done too bad a job on energy. Ben Potter finally converted to energy transformation in recent years and Angela Macdonald-Smith has, at times, described the great gas gouge. But it sure ain’t coming from the top, via Michael Stutchbury’s note on the weekend:
Coal is Turnbull’s new black. Wages the economic growth risk. Richard Goyder’s AFL finals. Sydney tops BOSS MBA rankings. Australia’s top 500 private companies. Is marriage an outdated institution anyway? afr.com digital news site of 2017.
As Laura Tingle writes this morning in Canberra Observed , Malcolm Turnbull has had a good political week promoting coal – or at least the idea that the government would extend the lives of coal-fired power stations to keep the lights on. Coal is the new black, we suggested in a page one sub-head.
The energy debate was dominated by the report from Audrey Zibelman, the Philadelphian brought in this year to run the Australian Energy Market Operator, one of the shock of electricity grid regulators.
The problem is that Australia’s energy and climate change policy failures have force-fed too much wind and solar power into the east coast grid. That is destabilising the system when the wind doesn’t blow or the sun doesn’t shine, as highlighted by South Australia’s statewide blackout a year ago this month. The instability is getting more intense as base load coal-fired power stations, such as Victoria’s Hazelwood, reach the natural end of their lives.
That’s raising the blackout risks for this summer, particularly in Victoria and SA. It’s prompting Zibelman to build up so-called strategic reserves of energy – such as mothballed gas-fired plants – for emergencies. And it’s prompted Turnbull and energy minister Josh Frydenberg to press big power company AGL to postpone the next big planned coal-fired shutdown – of Liddell in NSW in 2022. That would take 1000 megawatts of baseload off the system, and even Turnbull’s Snowy Hydro or Tesla batteries would not provide enough storage to cover by then.
But AGL chief executive Andy Vesey is making a song and dance about getting out of coal. On Wednesday, the New Yorker tweeted that AGL was committed to closing Liddell by 2022, prompting a phone call from Turnbull. The government was turning Godfather, making AGL offers it could not refuse, suggested our Matthew Stevens. Delta Power owners and coal champions Trevor St Barker and Brian Flannery put up their hands for some of the action. The NSW government might be part of the plan, Phillip Coorey wrote this morning.
What about gas, Michael? Where’s your acknowledgement of the role of the gas price? Where’s your recollection that Santos lied about having enough gas when it built its second LNG train on Curtis Island, the volumes for which just happen to equal the gas shortage? Where’s your assessment of the perverse economics of the gas gouge: that we’re paying nearly triple export net-back and double the price of the same gas in Japan? And that the gas firms lose money on the exports, not to mention that Asian customers don’t want it? Where’s your guidance on the crucial role that gas plays in setting the marginal cost of electricity? Where’s your outrage that gas power plants sit idle while AGL is being bullied into mis-allocating capital towards coal, in a complete violation of power market integrity? Where’s your statement of the simple truth that it is gas alone that has derailed the decarbonisation plan?
Meanwhile, Judith Sloan sinks to new lows in her campaign to protect the gas cartel:
…the kicker is the fact renewable energy, with its preferential dispatch status and low operating costs, sends dispatchable power plants into early retirement and kills off the incentives to build new ones. Note that since 2011 nearly 6000 megawatts of coal-fired plant capacity has been withdrawn from the market, or close to 12 per cent of total capacity.
Now the point is often made that we have reached this appalling position — high-cost, unreliable electricity affecting, in particular, the competitiveness of our heavy industries — because of very poor government policy.
But whether the outcome was entirely unintended is not so clear-cut. From the time John Howard introduced the first version of the renewable energy target, it was a one-way street to more subsidised, intermittent renewable energy and an investment strike in dispatchable energy. This was the aim; it could not have been otherwise.
To be sure, there has been plenty of toing and froing in the policy space. The carbon tax, at the ludicrously high figure of $23 a tonne of carbon dioxide-equivalent in 2012-13 (rising to $24.15 the next financial year), was a high water mark of stupidity. Don’t forget this tax, which was nearly three times the EU price, was imposed in combination with a ludicrous RET of 41,000 gigawatt hours.
That the tax was abolished and the RET wound back by the Abbott government meant that imminent disaster was averted, but the future possibility was not removed entirely.
…So where does this leave the government? It was a mistake to think AGL is on its side. The company is more than happy to use misleading advertising — we’re getting out of coal and the like — while securing more than 90 per cent of its profits from fossil fuels. Its aim is to milk these assets for all they are worth while pretending to be greener than Kermit.
…The most pressing need of the government is to secure the future of dispatchable electricity generation and to do so at reasonable prices. Everything else is a side-show.
Yes, Janet, as we know, there was a plan. It’s called climate change mitigation. The idea was to use policy of various forms to price the externality of carbon emissions. That is, to make coal and other forms of dirty power pay for what they were getting for free: the corruption of the atmosphere. The only way you can not see this freebie as a gigantic public subsidy is if you don’t believe in the impacts of greenhouse gases.
That’s all that the carbon price did and, lo, when it was done, and coal power no longer got the polluted air for free, renewable energy was suddenly the most competitive.
But the Coalition misrepresented the carbon price as a tax, just like Janet is doing today, and destroyed it. The result was that coal could keep polluting for free, and instead of it paying for its own clean-up, consumers had to pay directly to shut coal power stations via “direct action” and the RET.
The second part of the plan was to use gas-fired power as the “transitional fuel” as coal closed and we waited for energy storage technologies to catch-up. But that plan was destroyed when a gas cartel formed and sold the east coast’s cheap gas to Asia instead. The worst offender at the company level was Santos where, lo, Judith used to be a director.
Sure, Labor might have tried to stop Santos in 2010 but the Coalition had also just destroyed the resource rent tax so it didn’t have the cojonies for another fight. And besides, Santos straight up lied about having enough gas.
Thus, today, “the most pressing need of the government is to secure the future of dispatchable electricity generation and to do so at reasonable prices” but the only way to achieve it is not blow smoke around coal plant closures that are five years away, it is to cut the cost of gas, which has idled capacity across the nation and, when it is used, it is fabulously expensive.
Ironically, Do-nothing Malcolm is on the right territory today:
The Prime Minister targeted Labor leader Bill Shorten’s “incompetence” on energy policy in a speech to the Country Liberals’ annual conference in Darwin this morning.
“Australia is a massive gas province, with huge offshore resources — many still to be developed … and of course, many onshore resources. But we have Labor governments that will not develop them,” Mr Turnbull said.
“You have, in the Labor Party, a party whose energy policies have taken us into an energy crisis. Where energy is too expensive and it’s not reliable.”
Mr Turnbull called for the Northern Territory Labor government to remove its moratorium on development, such as fracking, of the Beetaloo Basin to open up gas opportunities.
“My message to Michael Gunner is to pull the trigger and get on with it,” he said. “The jobs, the investment, the opportunities of opening up the gas you’re sitting on are endless.”
It would be good to see these unconventional gas fields developed but even if they are it will not fully solve the problem. It’ll take time and all of the cheap gas has been sold to Asia. Some of that has to be clawed back via domestic reservation. That is the the only way to lower gas and electricity prices short and long term.
The Deputy PM of New Zealand went on:
Meanwhile, Deputy Prime Minister Barnaby Joyce has warned of a summer of blackouts unless politicians embrace coal power solutions.
Energy policy is front and centre at the Nationals federal conference in Canberra, which Mr Joyce addressed this morning.
“Somewhere between floor 13 and 14 the lift will stop with you in it – an uncomfortable experience if you need to go to the bathroom,” the Nationals leader said.
Fair dinkum, mate, you can’t even fill in an application form for Parliament and you want us to take you seriously on the complexities of energy? There is NO solution via coal that will do anything to prevent summer blackouts. The next plant closure is not until 2022. Again, only a lower gas price can do it for the next five years at least.
Alan Kohler does a great job of summing up the Coaltion stupidity today:
In 2014, Vesey’s predecessor, Michael Fraser, had bought Macquarie Generation and its two coal-fired power stations, Bayswater and Liddell, from the NSW Liberal government for $1.5 billion — a huge windfall for the NSW Liberal government.
But just a year later Vesey gave notice that Liddell would close in 2022. This week I asked a company spokesman what had changed between 2014 and 2015. The answer: it was the company’s “Greenhouse Gas Policy”, issued in April 2015.
It wasn’t that AGL suddenly discovered the plant was old, or that it had knowingly bought something that had eight years’ life left. AGL had decided to support “the Commonwealth government’s commitment to work towards a global agreement…” as its new policy statement said.
Factories, including power stations, don’t have use-by dates. Vesey and the AGL board had decided that “AGL will not extend the operating life of any of its existing coal-fired power stations”, in order to support the Abbott government’s emissions reduction strategy.
As it happens, AGL had already made a similar mistake the other way: it finalised the purchase of the Liddell power station in July 2014, at exactly the same moment as the Coalition was ludicrously celebrating the repeal of the Gillard government’s emissions trading scheme legislation — the so-called “carbon tax”.
But what the Abbott government did not do was repeal the Renewable Energy Target.
…With the Coalition government subsidising solar and wind so it could outbid fossil fuels into the NEM and making statements supporting an agreement in Paris, closing ageing coal-fired power stations seemed an obvious thing for their owners to do. Origin decided to close Eraring in the early 2030s and French-owned Engie decided to close Hazelwood, pretty much straight away.
…everybody knows coal-fired power stations must close if Australia is to meet the 2 degree commitment that everybody agreed to in 2015 — including the Coalition. The task of leadership is to prepare for that, not yearn for coal.
…There won’t be any new coal power stations, and the lives of existing ones won’t be extended unless the government, bizarrely and unnecessarily, pays for it.
If that happened, it would bring about the final divorce of business and the Coalition, and the final retreat by Malcolm Turnbull into the loony fog inhabited by Donald Trump and the coal dancers on the Coalition’s right.
Labor is not blameless for Australia’s energy impasse but the Coalition’s wreckage is everywhere. In a case of deja vu all over again, here it is again bald-faced lying about energy policy to win power. Card-carrying climate change skeptic Graham Richardson is cock-a-whoop:
In Friday’s column I congratulated our Prime Minister for finally working out how to attack Bill Shorten. Over the previous couple of weeks attacks by Malcolm Turnbull, Mathias Cormann and Christopher Pyne on the Opposition Leader as the most left-wing person to have ever led Labor flopped utterly and completely.
The mob will always work you out and they worked out pretty quickly that this was low-grade politics which had no bearing on their lot in life.
It has been obvious for months that Labor’s chronic weakness lay in its total reliance on renewable energy but our PM’s own views on climate change for far too long prevented him from separating the wood from the trees.
Finally, after months of dithering, spurred on by anxious Energy Minister Josh Frydenberg, Turnbull relented.
Last Thursday Labor was the party of blackouts and that was a good start. Within 24 hours that phrase had morphed into the deadly “Blackout Bill”. If the PM can make that stick, then he may well be on the road to a political recovery which seemed so improbable just a couple of weeks ago.
It’s not just loony, it’s malevolent.