Grattan on Friday: King Coal is wearing big boots in the Turnbull government



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Labor mentioned Scott Morrison’s ‘pet rock’ during Question Time on Tuesday.
Lukas Coch/AAP

Michelle Grattan, University of Canberra

It took quite a while, but the Turnbull government this week finally “landed” its package for the biggest shake-up of media rules in decades.

The Senate deal was done thanks to a sprinkling of sugar for crossbenchers. Handouts for Nick Xenophon to help regional and small publishers, so he could say he was promoting “diversity”. Promises to Pauline Hanson to put some burdens on the ABC, so One Nation could brag it was chasing “the elephant in the room”.

The concessions don’t mean as much as the crossbenchers will claim, while the rule changes potentially mean a great deal. It might have seemed a tortuous process, but from the government’s point of view it has been a significant win at little cost.

If only the nation’s long-term energy policy could be “landed” as readily.

With the media changes, the industry stakeholders were united, in contrast to the vastly more complicated area of energy, as it transitions from fossil fuels to renewables, via a mixed system.

In another major difference with media policy, the most difficult negotiations on energy, at least imminently, are not with crossbenchers but within the government’s own ranks.

Just as it did in the dying days of his leadership in 2009, the coal cloud hangs darkly over Malcolm Turnbull. And once again, the Nationals are big players in the debate – and so is Tony Abbott.

But Turnbull’s own positions then and now are poles apart. In 2009, he famously championed the move to renewables, via a carbon price, which triggered his downfall. This time, bowing to the power of coal, he has increasingly become its vociferous public advocate.

When the government released the Finkel report on energy security in June, Turnbull made it clear he saw its centrepiece, a clean energy target (CET), as a torch to light the path to the future.

Chief Scientist Alan Finkel’s CET, with its particular focus on reducing emissions, was never going to be implemented in a pure form. Coal was always set for a larger role than Finkel would want, as Turnbull quickly made clear.

The CET debate should be seen as choosing a place on a spectrum rather than accepting or rejecting a single point. But at the start, even Nationals leader Barnaby Joyce was (sort of) on board for a CET, provided it allowed coal in.

Progressively, however, the Finkel blueprint has been pushed further and further on to the defensive.

The sharpest setback for it came last week, with the release of the report from the Australian Energy Market Operator (AEMO) warning of electricity shortages in coming years. The government had commissioned the report when it became panicky about so-called “dispatchable” power – power available whenever needed to meet demand – as the consequences of the closure of Hazelwood in Victoria sank in.

Energy Minister Josh Frydenberg said the AEMO report “reset the debate”. Joyce invoked John Maynard Keynes’ observation about changing his mind when he got new information – the report contained “new information”, Joyce said.

In fact the “resetting” had been creeping up well before the AEMO report. Abbott, especially, had been hard at work prosecuting the case against renewables.

Abbott – who was deposed two years ago this week – currently has two campaigns running: against the CET, and in opposition to same-sex marriage. He is highly energised and said to be enjoying himself.

On Thursday he was unequivocal. “We need to get right away from talking about renewable energy targets and clean energy targets and start talking about a 100% reliable energy target, ‘cause nothing else will do,” he said on 2GB.

“I welcome these signs that we are moving away from a clean energy target to a reliable energy target,” he said. Renewables always had to have a back-up “and if there’s got to be back-up you’ve got to ask the question, what useful purpose do they serve?

“Now there may well be some circumstances in which renewables in conjunction with back-up measures are economic, and if they’re economic and dependable, fair enough, but at the moment, they’re neither.”

The Nationals’ Matt Canavan, former resources minister who is on the backbench awaiting the citizenship case, has been a very loud voice for coal. The Nationals had the megaphone out at their weekend federal conference, calling for subsidies for renewables to be phased out.

As coal has muscled its way to the centre of the stage, we’ve seen the showdown between the government and AGL over the future of its Liddell coal-fired power station. This battle has a way to go.

At a trivial but symbolic level, there’s been the suggestion that whatever policy the government finally produces will avoid the sensitive “clean energy target” label. Maybe the focus groups are already at work on that one.

Despite the apparent mess, the government believes it can turn the energy debate to its political advantage. This is certainly the view among Nationals.

The strategy involves being seen to do a lot of things – Turnbull rehearses the check list of interventions on gas, power bills and the like – and demonising Labor’s attachment to renewables, with derision against “Blackout Bill”, “Brownout Butler” and “No Coal Joel [Fitzgibbon]”.

The government accuses Labor of selling out working-class people in favour of leftist, inner-city followers concerned about climate change. Turnbull is now emphasising the cost and reliability of power, with emissions reduction referred to sotto voce.

The Nationals are convinced their priority for coal will work well for them in the regions. They say it fits with the two issues that come at the top in their polling – jobs and cost of living.

When Abbott was fighting the Labor government, the carbon tax’s impact on the cost of living was an obvious plus for him. The question is whether power prices and cost of living can play for the Coalition when it is in office. The government and some observers suggest it will.

It does seem counterintuitive. Unless the voters are very gullible, you’d think they’d judge on results not rhetoric – that is, what their power bills are looking like when they get to the ballot box.

On the other hand, the government argues that if it can assert Labor’s policies would bring even higher bills, it can gain a tactical advantage.

Regardless of what the public are thinking, it’s clear that business – the constituency critical for future investment – remains deeply unimpressed with the politicking.

The ConversationUnless and until the government gets to grips with the substance of what needs to be done, the lack of a coherent energy policy will remain an indictment of the politicians and a burden on Australian families and enterprises.

https://www.podbean.com/media/player/fr3g9-72ed6d?from=site&skin=1&share=1&fonts=Helvetica&auto=0&download=0

Michelle Grattan, Professorial Fellow, University of Canberra

This article was originally published on The Conversation. Read the original article.

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Time for pragmatism, not panic, for the electricity market



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There are many viable options for Australia’s energy future.
Shutterstock

David Blowers, Grattan Institute

There was a familiar kneejerk reaction to last week’s announcement by the Australian Energy Market Operator (AEMO) that there are risks to our electricity supply after the scheduled closure of the Liddell coal-fired power station in New South Wales in 2022. The sight of the Prime Minister looking for options to keep Liddell open raises the spectre of further reflexive government intervention that can’t end well.

Governments, understandably, want to make sure the lights stay on. But now is the time for perspective, not panic. Because, as the latest Grattan Institute report – Next Generation: the long-term future of the National Electricity Market – shows, there are emerging challenges to the NEM that need dealing with. Make the right decisions now and a return to affordable and reliable electricity supply is on the cards.


Read more: The true cost of keeping the Liddell power plant open


The NEM is an energy-only market. This means that generators only get revenue when they sell their electricity into the market. All costs – including the capital costs of building the plant – need to be covered by the revenue they make when they sell electricity. Anyone who wants to build new generation capacity wants to be pretty certain that the market is going to deliver the revenue they need to cover their costs.

But right now no one is building any generation, unless it is government-backed renewables. This is despite a ripe environment for investment: high current and future prices in the wholesale market and the closure of old power stations. The result, as AEMO pointed out last week, is potential shortfalls in generation and potential blackouts in South Australia, Victoria and NSW over the next few years.

Much of the blame for this investment hiatus can be placed on politicians and the climate change policy mess that is creating so much uncertainty for potential investors.


Read more: Turnbull is pursuing ‘energy certainty’ but what does that actually mean?


But the rise of wind and solar power is also causing problems. Wind and solar energy have zero marginal cost: once the facility is built, the energy produced is essentially free. And they are intermittent suppliers: they don’t produce energy unless the wind is blowing or the sun is shining. So when wind and solar plants are operating, the wholesale price of electricity is forced down. This means there needs to be high prices – sometimes very high – when wind and solar are not operating. This price volatility makes investors nervous that they will not be able to cover the costs of building new generation.

Governments may be tempted to conclude that the market has failed. But intervention may be premature.

There are still five years until Liddell is scheduled to close. Just because a new coal-fired power station will not be built in time to fill the gap doesn’t mean the market cannot respond. Coal was never going to be the market response, given climate change risks. But new gas-fired generators, or batteries to store electricity, could be built in this time frame. Or the market could finally get its act together on what is called demand-response: that is, paying consumers to reduce their electricity consumption during periods of peak demand, so that less new generation is required.


Read more: Managing demand can save two power stations’ worth of energy at peak times


There are no guarantees for government, however. The risks that the market won’t deliver the new generation that is needed are increasing. If nothing changes, Australia will need, in the words of AEMO, “a longer-term approach to retain existing investment and incentivise new investment in flexible dispatchable capability in the NEM”.

Many countries have responded to these same pressures by introducing a capacity mechanism. A capacity mechanism pays generators for being available, regardless of whether they actually sell electricity. Payments for capacity provide extra income for generators, giving them greater assurance that they will make enough revenue to cover their costs.

Any new market-based mechanism in Australia is likely to be better than the scattergun approach of various governments in recent years. Building Snowy 2.0, extending Liddell’s life, or providing state-based backing for new renewable generation might deliver the results needed. But the lack of coordination, planning and strategic thought that sits behind these policies means they probably won’t.

Getting it right

Our report suggests a better way. First, governments should give the market a chance. This means sorting out climate change policy, and quickly. Dithering about a Clean Energy Target, or arriving at a solution that cannot be supported across the political spectrum, will guarantee that investors’ hands remain firmly in their pockets.

Second, work should begin immediately on an additional capacity mechanism, so it is ready if needed. Capacity mechanisms are complex and take a long time to design and implement. There is no one-size-fits-all approach, so careful consideration needs to be given to how one would work in the Australian context.

Finally, AEMO should be asked to provide a more robust assessment of the future adequacy of generation supply. On the basis of this information, the newly formed Energy Security Board should make the judgement on whether an additional capacity mechanism is needed to make sure enough new generation is built.

The ConversationIt is understandable that politicians feel the need to act when faced with the threat of blackouts. After all, they are the ones who get the blame when the lights go out. But caution is needed. Capacity mechanisms are expensive; the peace of mind they bring comes at a price. A pragmatic and planned approach is the best way to ensure that, if a decision is made to redesign our electricity market, that decision is the right one.

David Blowers, Energy Fellow, Grattan Institute

This article was originally published on The Conversation. Read the original article.

What about the people missing out on renewables? Here’s what planners can do about energy justice



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Solar panels are integrated into a block of flats in the Viikki area of Helsinki, Finland.
Pöllö/Wikimedia, CC BY

Jason Byrne, Griffith University and Tony Matthews, Griffith University

The rapid shift to new energy sources is outpacing land use planning in cities. As interest in renewable energy burgeons, another concern has emerged – energy justice.

Improvements in renewable energy generation, energy efficiency and storage technology benefit more advantaged populations like homeowners. These innovations are generally beyond the reach of more disadvantaged groups like renters, pensioners, students and the working poor. Researchers see this as an emerging energy justice concern.

Energy costs hit the poor harder

Rising power bills hit lower-income households particularly hard.
shutterstock

A recent report, prepared by the Australian Council of Social Service, The Climate Institute and the Brotherhood of St Laurence, highlighted the disproportionate impacts of energy poverty. Current policy settings and energy price rises make life even more difficult for people who are already struggling to pay their power bills.

Energy price rises can affect residents’ ability to cool or heat their homes, cook food and get hot water. Ultimately, this can have dire consequences for people’s health and wellbeing.

Attention has been drawn to the inability of such households to tap into renewable energy in Western Australia and the Northern Territory. Less well known are the emerging opportunities to reduce energy poverty. These include solar leasing, energy co-operatives and landlord incentives.

Solar leasing

Solar leasing is a strategy where a homeowner signs an agreement with a company to install solar panels. Up-front costs are limited and the system is paid back incrementally over its lifespan. In theory, this could enable landlords and low-income owners to gain access to cheaper solar energy.

There are many variations on such leases. One involves the owner buying power back from the leasing company, which sells surplus power to the grid. Another is where the owner obtains a low-cost loan, such as those offered by the Fannie Mae foundation in the US.

Some caution is warranted before entering such agreements, not least because leases can make homes harder to sell.

The relative vacuum of Commonwealth energy policy in Australia is prompting some local governments to step in. The City of Darebin in Melbourne is an example. Its Solar Saver Program aims to help pensioners and other low-income earners get solar panels on rooftops. The panels are installed up-front and paid back through rates.

Some councils are helping pensioners and other low-income earners to install solar panels to cut their energy bills.
Michael Coghlan, CC BY-SA

Community renewable energy co-operatives

A second idea is to increase competition in the energy market by enabling communities to generate their own energy. Community renewable energy projects are an example.

But such projects need not be market-based. A recent innovation in New South Wales has been the development of an energy co-operative in Stucco apartments, a non-profit, student housing complex. This small-scale co-operative generates solar energy and stores it in batteries, selling it to tenants in the building, who are low-income students.

Larger versions exist in Germany. There whole villages have become energy co-operatives of sorts, achieving energy self-sufficiency.

Landlord incentives

A landlord who makes improvements such as double glazing should be able to claim these as a tax deduction.
Paul Flint/flickr, CC BY-SA

Several commentators have identified the need for better incentives and penalties to encourage landlords to retrofit properties to make them more energy-efficient.

This includes changing the tax system. If rental properties are upgraded – with insulation, more efficient hot water systems, energy-efficient stoves or windows – these costs should count as legitimate tax deductions. Currently, these improvements are not treated as repairs and instead are depreciated over time.

Similarly, new minimum standards for energy efficiency in rental properties are needed. The NSW BASIX system is a step in this direction.

The energy justice challenge for planners

Land use planning systems are typically future-oriented. But most of the buildings that will exist in the middle of this century are already built.

We need to update planning systems to better manage systemic changes in existing built environments. These changes include the transition to renewable energy and associated energy justice concerns.

There are possibilities for improvement. For example, planners can learn from early innovations like the Stucco model. Working proactively with community energy co-operatives could reduce uncertainty for all stakeholders, minimise time wasted and maximise returns for participants.

Planners can also develop new policies and processes – such as model town planning schemes – to work with communities in delivering other small-scale renewable energy projects such as community solar farms and microgrids. Another possibility is to alter strata title laws to make it easier to install solar in apartment buildings.

The ConversationModern land use planning was driven in large part by a desire to improve public health and social justice by regulating development. Today’s planners should regard efforts to improve energy justice as a new but entirely appropriate professional responsibility.

Jason Byrne, Associate Professor of Environmental Planning, Griffith University and Tony Matthews, Lecturer in Urban and Environmental Planning, Griffith University

This article was originally published on The Conversation. Read the original article.

The true cost of keeping the Liddell power plant open


Frank Jotzo, Australian National University and Zeba Anjum, Australian National University

For a long time, Australian governments have believed that the private sector should run the electricity sector. And successive governments have used market instruments to incentivise reducing emissions, by supporting renewables, discouraging coal use, or both.

Now things seem inside out: uncertainty about energy policy mechanisms is pervasive, and the federal government is attempting to broker a deal for the ageing Liddell coal plant to stay open past its planned decommissioning date. It’s possible the plan will require government payments – amounting to a carbon subsidy.


Read more: AGL rejects Turnbull call to keep operating Liddell coal-fired power station


Fear of supply shortages and an appetite for coal have combined with an inability to resolve the political side of energy and climate policy.

Power companies see coal as a technology of the past, but the government seems unready to accept that wind and solar technologies (already the cheapest option for new capacity in Australia) are the future of Australia’s power.


Read more: The day Australia was put on blackout alert


The latest suggestion amounts to deferring serious investment in renewables for a while, fixing up some of the old coal plants up so they can run a few more years, and buying time in the hope of keeping power prices down. Chief Scientist Alan Finkel has backed the idea, at least in principle.

The cost of delaying the inevitable

Commissioned in 1972, the Liddell power plant is the oldest of Australia’s large coal-fired stations (after the closure of the Hazelwood station). The New South Wales government sold it to AGL in 2014, at an effective price of zero dollars.

AGL announced some time ago that it will close the plant in 2022 and has considerable financial incentive to do so. This week AGL reiterated this. The latest suggestion is that Delta Electricity might buy and continue to operate Liddell.

What might be the benefits and costs of keeping Liddell running for, say, another decade? We do not know the plant-level technical and economic parameters, but let’s look at the principles and rough magnitudes.

Keeping the plant running longer will require refurbishments, defer the investment costs in renewables, and result in additional emissions, both in carbon dioxide and local air pollutants.

Refurbishment is costly. Finkel put refurbishment costs at A$500-600 million for a 10-year extension. Such refurbishment might achieve an increase in efficiency – as GE, a maker of power station equipment, recently argued – but perhaps not by much for a very old plant like Liddell.


Read more: Coal and the Coalition: the policy knot that still won’t untie


And refurbishment might not work so well, as the experience with the Muja plant in Western Australia shows: A$300 million was spent on refurbishment that ultimately failed. Spending big money on outdated equipment is not a particularly attractive option for energy companies, as AGL’s CEO recently pointed out.

Liddell’s power output during 2015-16 was around 8 terawatt hours – about 10% of present NSW power supply (it was more in 2016-17, and less in previous years). It might well be lower as the plant ages.

Ironically, the reduction in the Renewable Energy Target, from 41 to 33 terawatt hours per year, almost exactly matches Liddell’s present power output. With the original RET target, new renewables would have covered Liddell’s output by 2020.

Liddell emitted around 7.5 million tonnes of carbon dioxide per year in 2015-2016. With the assumed reduction in output and some improvement in CO₂ emissions intensity, the carbon dioxide output might be in the order of 5-6 million tonnes per year, or 50-60 million tonnes over ten years.

If the government were to pay for the refurbishment, as has been suggested, this would equate to subsidising CO₂ emissions at a rate of perhaps $10 per tonne, compared to the alternative of replacing Liddell with renewable power.


Read more: FactCheck Q&A: is coal still cheaper than renewables as an energy source?


At the same time, the government is paying for projects to reduce emissions, at average prices of around $12 per tonne of carbon dioxide, under the Emissions Reduction Fund. The contradiction is self-evident. Furthermore, keeping more coal plants operational deters commercial investment in any kind of new plants.

Of course this needs to be seen in the context of supply security, any subsidies that might be paid in future to renewable energy generators, and the possibility that a Clean Energy Target will determine overall emissions from electricity production irrespective of whether Liddell operates or not. It’s complicated. But the fundamental point is clear: paying for an old coal plant to operate for longer means spending money to lock things in, and delay the needed transition to clean power.

A possible compromise might be to mothball the Liddell plant, to use if supply shortages loom, for example, on hot summer days. But such a “reserve” model could mean very high costs per unit of electricity produced.

It is not clear that it would be cheaper than a combination of energy storage and flexible demand-side responses. And it may be unreliable, especially as the plant ages further. During the NSW heatwave last summer Liddell was not able to run full tilt because of technical problems.

A market model to pay for reserve capacity would surely do better than government direction.

Australia’s energy companies have been calling for a mechanism to support new clean investment, such as the Clean Energy Target. And many would no doubt be content to simply see a broad-based, long-term carbon price, which remains the best economic option. If the policy framework was stable, private companies would go ahead with required investment in new capacity.


Read more: Finkel’s Clean Energy Target plan ‘better than nothing’: economists poll


The ConversationMeanwhile, federal and state governments are intervening ad-hoc in the market – making a deal to keep an old plant open here, building and owning new equipment there. It is the worst of all worlds: a market-based system but with extensive and unpredictable intervention by governments that tend to undermine investor confidence.

Frank Jotzo, Director, Centre for Climate Economics and Policy, Australian National University and Zeba Anjum, PhD student, Australian National University

This article was originally published on The Conversation. Read the original article.

Grattan on Friday: Turnbull’s rush for an energy ‘announceable’ sows confusion


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Malcolm Turnbull has tried to focus on energy policy while the opposition has been preoccupied with the eligibility of Barnaby Joyce.
Mick Tsikas/AAP

Michelle Grattan, University of Canberra

Barnaby Joyce looks like he’s doing it tough. Day after day, he sits behind Malcolm Turnbull in Question Time, facing Labor’s unrelenting attack on his right to be on the frontbench.

There’s the occasional laugh, to keep up appearances, but mostly he has the face of a man who’s whipping himself.

What’s most personally painful for Joyce, who as leader has been very focused on maintaining the Nationals’ sense of loyalty to the team, is that he has let the team down.

A check would have revealed he needed to address his dual New Zealand citizenship. He regularly warns the Coalition partyroom against distractions and he is embarrassed that he’s caused a big one.

But what’s done – or wasn’t done – is now in the past. Turnbull might be confident the High Court will uphold his position but Joyce is already preparing for a byelection if things go badly.

The government can accuse the opposition of neglecting mainstream issues in its preoccupation with Joyce.

Its tactic, however, does serve to further unsettle him. Also, if the court were to find against him Labor, with its argument that he should have stood aside from the front bench at the start, would have laid the groundwork for some of its byelection campaigning. But if Joyce is vindicated Labor will have misplayed.

The court outcome on Joyce – to be considered among the swathe of MPs’ citizenship cases – is harder to predict than was the result in the challenges to the same-sex marriage postal ballot. On Thursday the court declared that ballot constitutional, as always seemed more likely than not.

There are still hurdles ahead for Turnbull on same-sex marriage – notably, he needs the “Yes” case to win. But at least he’s over a major one. Having the ballot struck down would have brought a crisis for him.

If the court does uphold the eligibility of Joyce and those with similar circumstances, it will surely mean it is effectively rewriting the constitutional provision that makes dual citizens ineligible for parliament. It would be saying that many dual citizens, born in Australia of foreign-born parentage, can be properly elected.

Amid the various distractions and the continuing bad polls, Turnbull’s strategy has become to focus, laser-like, on what is currently the biggest bread-and-butter issue in the community – the state of energy prices and the future of energy policy.

Turnbull faces multiple separate but related pressures: to get people some early relief with their bills; to deal with the circumstances of coming summers; and to craft a long-term clean energy policy that can survive a partyroom where the forces of the right have loud voices and a deep commitment to coal.

This week, against the background of a report from the Australian Energy Market Operator (AEMO) highlighting the risks to the reliability of the electricity supply in the next few years, Turnbull was looking in particular to the medium term.

While at times he has encouraged the idea of supporting the building of new clean coal power stations, the AEMO report pointed to keeping some existing generators operating longer as a more practical course.

Thus on Tuesday Turnbull told parliament he and Energy Minister Josh Frydenberg were in discussions to extend the life of AGL’s Liddell coal-fired power station, in the Hunter region of New South Wales, for at least five years beyond its scheduled 2022 closure.

But then Andy Vesey, chief executive of AGL, which has made much of its long-term intention to move out of coal, reaffirmed via Twitter the Liddell closure schedule.

Later Turnbull told reporters AGL was willing to sell Liddell to “a responsible party”. In a statement to the ASX the following morning, however, AGL seemed less than keen on a sale, although it was unclear whether this was a substantive or holding position.

The government has since said Vesey made the comment that he would consider selling to a responsible party a month back, when Turnbull and several ministers met electricity retailers.

It has all looked pretty messy. Turnbull should have been more precise in his remarks to parliament, or waited to make them until the position was clearer.

AGL copped a vitriolic spray from Matt Canavan, the former resources minister who will be back in the job if the High Court clears his citizenship issue. Canavan called AGL “the biggest hypocrite walking around Australia at the moment” for making money from producing coal-fired power while advertising its exit from coal – but not until 2050.

It makes a somewhat fractious backdrop to the meeting Turnbull and Frydenberg will have with Vesey on Monday to discuss a possible sale.

After all that’s been said, the stakes seem high for both the government and Vesey. On the other hand, the government believes that in the public mind the power companies are about as unpopular as the banks, so going after them wins rather than loses points.

The government is confident a buyer will be available for Liddell, although it doesn’t want to be the purchaser. Any buyer almost certainly would demand some sort of government financial support.

The AGL affair is another example of the extraordinary amount of intervention in the market and the manhandling of business that the Coalition is willing to resort to as it grapples with the energy conundrum.

Retailers have been summoned twice to be told to ensure customers can get the best deals available. The government not only plans to expand the Snowy but wants to buy out the whole enterprise. Then there is its willingness to use export controls to get more gas available for the local market.

As one government man puts it, “extraordinary problems create extraordinary interventions”. And ironies too, now that ministers have taken to labelling Bill Shorten a socialist leading New “Red” Labor. It would make as much sense – which is not much – for Labor to throw similar rhetoric back at the Coalition.

Whether from all this, and the still-to-be-joined battle over a clean energy target, will emerge a policy framework sufficient to convince voters that the government is getting on top of the challenges remains to be seen.

The ConversationIn trying to grapple with energy Turnbull is playing on the right field, but being able to kick the goals is another matter.

Michelle Grattan, Professorial Fellow, University of Canberra

This article was originally published on The Conversation. Read the original article.

Coal and the Coalition: the policy knot that still won’t untie


Marc Hudson, University of Manchester

As the Turnbull government ties itself in yet more knots over the future of coal-fired power, it’s worth reflecting that climate and energy policy have been a bloody business for almost a decade now.

There was a brief period of consensus ushered in by John Howard’s belated realisation in 2006 that a price had to be put on carbon dioxide emissions. But by December 2009 the Nationals, and enough Liberals, had decided that this was a mistake, and have opposed explicit carbon pricing ever since.


Read more: Ten years of backflips over emissions trading leave climate policy in the lurch.


The resulting policy uncertainty has caused an investment drought which has contributed to higher energy prices. Now, with prices a hot potato, there are thought bubbles about extending the life of coal-fired power stations and a new effort to set up a Conservatives for Conservation group.

But the Liberal Party’s tussles over climate and energy policy (as distinct from denying the science itself) go back even further – some 30 years.

Early days and ‘early’ action

It’s hard to believe it now, but the Liberal Party took a stronger emissions target than Labor to the 1990 Federal election. Yet green-minded voters were not persuaded, and Labor squeaked home with their support. After that episode the Liberals largely gave on courting green voters, and under new leader John Hewson the party tacked right. Ironically, considering Hewson’s climate advocacy today, back then his Fightback! policy was as silent on climate change as it was on the price of birthday cakes.

In his excellent 2007 book High and Dry, former Liberal speech writer Guy Pearse recounts how in the mid-1990s he contacted the Australian Conservation Foundation, offering to to canvass Coalition MPs to “find the most promising areas of common ground” on which to work when the party returned to government. The ACF was “enthusiastic, if a little bemused at the novelty of a Liberal wanting to work with them”. Most Liberal MPs – including future environment minister Robert Hill and future prime minister Tony Abbott – were “strongly supportive” of the idea. But others (Pearse names Eric Abetz and Peter McGauran) were “paranoid that some kind of trap was being laid”. Nothing came of it.

Elected in 1996, Howard continued the staunch hostility to the United Nations climate negotiations that his Labor predecessor Paul Keating had begun. Not all businessmen were happy. Leading up to the crucial Kyoto summit in 1997, the Sydney Morning Herald reported how a “delegation of scientists and financiers” led by Howard’s local party branch manager Robert Vincin and Liberal Party grandee Sir John Carrick lobbied the prime minister to take a more progressive approach. Howard did not bend.

Howard stayed unmoved until 2006 when, facing a perfect storm of rising public climate awareness and spiralling poll numbers, he finally relented. Earlier that year a group of businesses convened by the Australian Conservation Foundation produced a report titled The Early Case for Business Action. “Early” is debatable, given that climate change had already been a political issue since 1988, but more saliently the report tentatively suggested introducing a carbon price. And Howard finally relented.

The carbon wars

The ensuing ten years after Kevin Rudd’s defeat of Howard don’t need much recapping here (go here for all the details). But one interesting phenomenon that has emerged from the policy wreckage is the emergence of some very unusual coalitions to beg for certainty.

In 2015, in the leadup to the crucial Paris climate talks, an “unprecedented alliance” of business, union, environmental, investor and welfare groups called the Australian Climate Roundtable sprang briefly into life to make the case for action.

Then, after the seminal South Australia blackout last September, a surprisingly diverse group of industry and consumer bodies – the Australian Energy Council, Australian Industry Group, Business Council of Australia, Clean Energy Council, Energy Users Association, Energy Consumers Australia, Energy Networks Association and Energy Efficiency Council – called on federal and state energy ministers to “work together to craft a cooperative and strategic response to the transformation underway in Australia’s energy system”.


Read more: Who tilts at windmills? Explaining hostility to renewables.


It’s in this light that the new Conseratives for Conservation lobbying effort should be seen. Its spearhead Kristina Photios surely knows she has no chance of converting the committed denialists, but she can chip away at the waverers currently giving them comfort and power.

Questions on notice

Of course, there are always cultural (or even psychological) issues, but you’d think that conservation would be a no-brainer for conservatives (the clue should be in the name).

There are a few questions, of course (with my answers in brackets).

  • Where were all the people who are now calling for policy certainty back in 2011 when Tony Abbott was declaring his oath to kill off the carbon tax? (They were AWOL.)

  • Will any business show any interest in building a new coal-fired power station? (No.)

  • Is renewable energy technology now advanced enough for them to make serious money? (We shall see.)

  • Can we make up for lost time in our emissions reductions? (No, and we have already ensured more climate misery than there would have been with genuinely early climate action.)

  • Will the Liberals further water down the Clean Energy Target proposal? (Probably.)

  • What will Tony Abbott say to UK climate sceptic think tank the Global Warming Policy Foundation when he gives a speech on October 6? (Who knows –
    grab your popcorn!).

  • What will happen to the Liberals in the medium term? (Who knows, but Michelle Grattan of this parish has some intriguing ideas.)

  • Are there reasons to be cheerful? (Renewable energy journalist Ketan Joshi thinks so.)

Perhaps the last word on this issue should go to John Hewson, who noted last year:

The ConversationThe “right” love to speak of the debt and deficit problem as a form of “intergenerational theft”, yet they fail to see the climate challenge in the same terms, even though the consequences of failing to address it substantively, and as a matter of urgency, would dwarf that of the debt problem. The “right” is simply “wrong”. It’s political opportunism of the worst sort, and their children and grandchildren will pay the price.

Marc Hudson, PhD Candidate, Sustainable Consumption Institute, University of Manchester

This article was originally published on The Conversation. Read the original article.

The day Australia was put on blackout alert



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One big mess: the market has failed to deliver on cheap, reliable energy.
Shutterstock

David Blowers, Grattan Institute

The only way the Australian Energy Market Operator (AEMO) could be blunter in its report on the state of our electricity system would be to stick a neon sign on top of its Melbourne head office saying “The market has failed”.

AEMO’s Advice to Commonwealth Government on Dispatchable Capability, released today, shows there are significant but manageable risks of the lights going out in South Australia and Victoria over the next two summers. And beyond 2018, AEMO will need more tools if shortfall risks are going to be dealt with.

The conclusions about the short-term risks are not surprising. AEMO has issued several reports over the past year or so telegraphing supply shortfalls in the next couple of years.

What is surprising is its view that action needs to be taken when Liddell, the AGL-owned power station in New South Wales, closes in 2022. That is five years away, and AGL has been trumpeting the decision at every opportunity, but AEMO is clearly not confident that the market will respond by delivering new generation, or storage, or demand response, to fill the gap.


Read more: AGL rejects Turnbull call to keep operating Liddell coal-fired power station


AEMO recommends immediate development of a strategic reserve that it can deploy to prevent loss of power over the next few summers. A strategic reserve is basically back-up generation (or storage or demand response) that is used only in an emergency.

AEMO’s job is to make sure there is enough generation available – that supply equals demand. A strategic reserve will deliver the capacity – be it gas generation, storage or demand response – that it needs to meet any shortfall. Neither coal nor wind and solar can fulfil this function. Coal takes too long to come online, while wind and solar provide intermittent supply so there is no certainty that renewable energy will be there when needed.


Read more: Managing demand can save two power stations’ worth of energy at peak times


A strategic reserve is an insurance policy, only to be used in extreme circumstances. And like any insurance policy it has a cost – a cost that will be passed on to consumers. Of course, if electricity keeps being delivered as required over the next two summers, governments and consumers may well consider this money well spent.

But a strategic reserve does not deal with the second problem AEMO is seeking to solve: that not enough dispatchable generation is being built in the National Electricity Market. Even with backup generation controlled by AEMO, Australia will still need new generation to provide day-to-day power when existing power stations such as Liddell close.

AEMO’s second major recommendation is the immediate “development of a longer-term approach to retain existing investment and incentivise new investment in flexible dispatchable capability in the NEM”.


Read more: The government’s new energy plans will leave investors less confident than ever


Since it was set up 20 years ago, the NEM has delivered sufficient generation to meet demand, and at a reasonable cost. But this report makes it clear that AEMO believes this is no longer the case and that changes to the market are needed.

The report is understandably silent on what this “longer-term approach” might look like, given that market design is tricky. But the report is unequivocal that a new mechanism needs to be in place by the time Liddell closes. If not, supply shortages – and the associated loss of power to consumers – will be far more likely.

AEMO has provided the federal government with a pathway to securing electricity supply for the foreseeable future. There will be costs, but all governments will have greater assurances that the lights will stay on.

What AEMO hasn’t done is call out the policy instability that has been a major reason we have got ourselves into this mess. Commentators, Chief Scientist Alan Finkel, and numerous industry players – including the Big Three owners of generation in Australia – have all long been arguing that the major barrier to investment in the NEM has been the dog’s breakfast that is climate change policy.

The federal government can use this report to satisfy critics within its own party that there is a plan to ensure enough dispatchable generation in the NEM.

But the government must not use AEMO’s report as a get-out clause that allows it to continue to avoid creating an effective emissions reduction policy in the electricity sector. If anything, the report should stand as a stark warning to politicians of all stripes about what happens when you get policy so badly wrong.

Bipartisan agreement on the only politically acceptable emissions reduction policy – a Clean Energy Target – may not be sufficient, but remains absolutely necessary, to ensure there is enough generation to meet Australia’s electricity needs.

The ConversationAEMO has shown it is willing to do its job. It is now up to our politicians to do theirs.

David Blowers, Energy Fellow, Grattan Institute

This article was originally published on The Conversation. Read the original article.