Andrew Liveras humiliates Turnbull’s energy mess

At The Australian today:

Malcolm Turnbull will try to head off the potential resignation of several ministers over the national ­energy guarantee with a promise to rebel MPs that the three big ­energy companies will be targeted for market manipulation and ­deliberately inflating power prices through secret contracts.

However, senior ministers have told The Australian this would not be enough to prevent Coalition MPs crossing the floor if the 26 per cent Paris emissions reduction target was not dumped or “decoupled” from the NEG.

…As the internal crisis deepens for Mr Turnbull, The Australian has been told the Prime Minister will announce that he will stamp out the big three vertically integrated companies — AGL, Origin and Energy Australia — from selling power between their generation and retail businesses at inflated prices.

That will be marginal price falls at best. That said, the big stick is the right idea it’s just being aimed at the wrong folks, with the disastrous ACCC again responsible. Gentailers can only gouge because the gas shock has disrupted all pricing. For the truth we turn to Andrew Liveras at the AFR:

The biggest reason we don’t have the market we need is that we keep asking the wrong question. Coal or renewables? Renewables or coal? Affordable energy or lower emissions? This is not an either/or debate.

The question we must ask is: why are we ignoring gas?

There’s no doubt that the Australian gas market is broken…Australia has a lot of gas…Australian gas prices used to reflect an abundance. Now gas is priced for scarcity…The solution is very well known: linkages of the north-west and north reserves at Alice Springs, with a connection to the east coast network from Moomba.

…A functioning market that reflected Australian reserves would supply enough gas and prices that would underpin the otherwise risky transition that we face in the years immediately ahead. It will keep prices low, lower emissions, and over time allow the introduction of affordable renewables.

…A simple, low-cost intervention to create an effective domestic market for Australian gas would itself bring down the cost of electricity immediately, since gas is the key fuel in meeting power demand as it fluctuates during the day.

Spectacularly simple. Fantastically true. How we ended up talking about a labyrinthine “NEG” instead of some basic measures to break the gas cartel is a Goebbels-scale snow job of national destruction.

Gas as the transitional fuel from coal to renewables was always the Australian plan. Somehow that truth was lost in the deluge of gas cartel propaganda, Coalition energy lies and catastrophic ACCC failure.

Forget the NEG. Forget the distrust ACCC. Forget the Coalition. All we need is little more gas. A lousy 200Pj out of exports of 4000Pj.

My preferred solution is tougher east coast gas reservation. But build the pipelines North or West if you want. It won’t be as cheap and, perversely, will rely on WA reservation to work. But it will be cheaper than today’s prices and it will prevent future gas shock scenarios that arise from LNG imports. Previously from the AFR on a pipeline from WA:

“It won’t be cheap gas from the west, but it will be affordable and it will be reliable,” Mr Barnett will say.

“The pipeline will provide security of supply and price, and can be built in a comparatively short period of time.

“What is required from government is a policy commitment to go ahead with the project and a determination to resolve all of the detailed issues that will inevitably arise. After all, it is our gas and our needs come first.”

Mr Barnett estimates the 3000km pipeline would cost about $5bn to build, and could feasibly charge a tariff of $3 per gigajoule of gas.

Wholesale east coast gas prices are trading between $9 and $12 a gigajoule, he said, compared with equivalent prices in WA of between $3.50 and $4 a gigajoule.

There is no fixing the gas market. As Liveras says, it’s failed. The apocalyptic ACCC handed all the cheap reserves to the export cartel. But it can be forced to drop prices. Build the pipelines with public money on a not-for-profit basis so that the output is as cheap as it can be and forces an effective price benchmark onto the cartel. If WA gas can be secured for $4 and piped for $2Gj then the entire energy crisis is over.