Mark Kenny says we shouldn’t underestimate Josh Frydenberg:
How persuasive is Josh Frydenberg? He needs to be very persuasive if he is to corral a sceptical party room once state and territory ministers meet from next week to finalise the proposed national energy guarantee.
The question holds the key to the government’s success on energy reform, and the financial viability of countless businesses and households, crippled by soaring power bills.
After a decade of trench warfare, the government is pleading for reason and a new era of compromise to replace polarisation, point-scoring, and blunt opposition.
You’re joking right, Mark? Try reading a little beyond the Canberra snake pit next time. Giles Parkinson for instance:
The Coalition government is ramping up the pressure on the Labor states, seeking to paint the National Energy Guarantee as the middle path and the one and only policy option, despite its desperate attempts to shift the discussion to meet the demands of its own right wing.
Energy minister Josh Frydenberg used a National Press Club appearance on Wednesday to try and force the states to agree on the as yet ill-defined NEG, arguing that economics and engineering should triumph over ideology, and there was a need for a market based solution.
Nice words, but the cynicism is breathtaking.
Ideology? This, from a man who has spent much of the past 18 months demonising renewables, arguing in the face of all evidence to the contrary from the CSIRO and the network owners that high levels of renewables is reckless.
Markets? This from a man who has spent much of the last week trying to bully AGL into extending the life of the Liddell coal fired power station – against the company’s own economic and engineering analysis which finds that replacing it with renewables and dispatchable options such as storage is cheaper and cleaner.
Frydenberg now even laments the fact that consumers had suffered from the policy disaster zone that now afflicts Australia.
As well he might. It was the Coalition government – in an attempt to appease climate deniers and technology luddites – that tore up the carbon price and tried to do the same with the renewable energy target, the Clean Energy Finance Corp and the Australian Renewable Energy Agency.
It is the Coalition that has ignored the Climate Change Authority and its call for an emissions reduction target that is twice as strong as its own, and that has dumped talk of policy compromise options such as the Emissions Intensity Scheme, and ignored the major part of the Finkel Review.
Frydenberg also complained that energy had become a cultural battle, insisting that the “answer lies neither in war on coal nor the nationalisation of our assets.”
This from a minister in a government that has just paid $6 billion to nationalise Snowy Hydro, so it can go ahead with a $6 billion project for Snowy 2.0 which has yet to establish its economic, environmental or engineering credentials.
This, from a minister who continues to promise – at the insistence of the party’s all powerful dissenters – that coal will be protected and reinforced by the NEG, regardless of the country’s commitment and duties to the Paris climate treaty.
Frydenberg’s political play is to bully the states to accept the NEG because is the only option on the table, and the “last chance for bipartisanship”,
It is this or nothing, he says, but the tragedy is that most independent analysis suggests that nothing would be better than this.
Even without having seen any modifications to the highly criticised mechanisms within the NEG, it is clear that without a more ambitious climate target, this or any policy will be useless.
This is the shocking situation the country finds itself in. The attempted positioning of Frydenberg in the middle path could have been well predicted following the crazy proposals from the Monash Forum for a series of government funded coal fired generators.
The latest version of the NEG that will be distributed to COAG energy ministers before a meeting next Friday (April 20).
The NEG has all sorts of concerns. Its proposal for contractural arrangements to meet emissions and reliability guarantees is seen by virtually every industry participant and observer as a recipe to lock in the power of the big energy incumbents, a result that will push up prices rather than lower them.
The reliability guarantee is ill-defined, and risks enforcing a heavy hand for a problem that barely exists. The emissions target is manifestly inadequate.
Analyst after analyst, even big utilities, say Australia can and should do better, and to lock in current targets would actually be worse than usual, impose a framework that prevents investment, and would end up being an economic, environmental and engineering disaster.
Yet Frydenberg insists that this is the middle ground.
That’s exactly right. The Do-nothing guarantee equals coal subsidy, higher prices and a headwind for everything that would actually fix the real problem.
Even Frydenlberg himself yesterday let slip the truth, via the AFR:
Energy Minister Josh Frydenberg has told power retailers to lower prices, claiming measures the government has already taken, such as increasing the supply of gas for domestic use, has dropped the wholesale power price by 20 per cent.
“The wholesale component is about a third (of an energy bill),” Mr Frydenberg told the National Press Club in Canberra on Wednesday.
“July is the next period in which energy companies will adjust their prices. I’ve made it very clear to the CEOs that, with that decline in the forward curve for wholesale prices, and what we’ve seen in the gas market as well, we would expect that to be passed on to consumers.
“I don’t know what the number’s going to…but certainly we are expecting to see power prices come down.”
Quite right. Electricity prices should ease (though there are complications around the timing of longer term contract prices between producers and retailers). Why? Not because there’s more coal. Not because there’s less renewables. For one reason and one reason only. The gas price fell 20% and it is the marginal price setter in the national electricity market (NEM).
All we need to do to fix energy costs and the decarbonisation project is lower the gas price further to something that vaguely reflects its extraction costs. The Government already has the means to do so in its new domestic reservation mechanism which is sitting idle on the shelf while the LNG export cartel throws huge volumes of cheap gas at Asian markets. It’s dirt cheap coming out of the ground at $1-4Gj yet local electricity producers are still paying $12Gj. Only 10% of the east coast export volumes (4% of national exports) need be held back for domestic use for the gas price to crater.
Despite all of the policy balderdash around decarbonisation, Australian energy transformation was travelling well until the last two years. It wasn’t as optimised or as cheap as it might have been but the pure economics of our brilliant renewable resources made it smooth anyway. The only fundamental thing that has gone wrong with energy decarbonisation is the role of gas, which was planned to displace coal for base load power as renewable storage prices caught down.
In the end, the formation of the east coast gas cartel was not even a domestic decarbonisation issue. It was an energy security one, around which Australia is unique in the world for NO policy. That lack of framework enabled a gas cartel to form. It threw a few lies at government about having enough of its own gas resources to feed giant LNG plants then went ahead and build way too much capacity, vacuuming up all unsold third party gas, giving it a monopoly choke-hold on local gas supply.
As Frydenberg himself can’t help admitting around his fountains of lies, the gas price is the key to everything. Burying that simple truth under the vast dump of institutional clag that is the Do-nothing Energy Guarantee is far worse damage than Tony Abbott ever did with his carbon price antics. To describe it as rational or centrist beggars belief. It is pure Banana Republic stuff.
If the gas price is not addressed by this government or the next then Australia in any recognisable sovereign form has ceased to exist.
