View from The Hill: Coal turns lumpy for Scott Morrison and the Nationals


Michelle Grattan, University of Canberra

Scott Morrison’s government is struggling with a fresh crisis,
the combination of a bitter domestic within the Nationals and the
conflicting imperatives of pitching to voters in Australia’s north and south on the highly charged issues of energy and climate change.

Former deputy prime minister Barnaby Joyce on Monday turbocharged his push to regain the Nationals leadership with a media blitz.

Obviously the former Nationals leader would like his positions back
now (despite saying “we’ve got to go to the polls with the team
we’ve got”) but if that’s not possible he’s staking his claim for
after the election.

There was a manic edge to Joyce’s Monday interviews, focused on leadership and championing coal. Explaining why, while he wouldn’t move for a spill, he’d feel no “guilt” about standing if the opportunity came, he described himself as the “elected deputy prime minister of Australia”. That claim was based on occupying the position when the Coalition won the election.

Bizarrely, he also questioned that emissions could be measured. “It is a self-assessment process by the major emitters … And then it’s compiled by the government. So basically, it’s a proposition about a supposition,” he said on the ABC.

Although these days he sounds more over-the-top than ever, Joyce resonates with Queensland Nationals fearing a loss of seats – they have boundless faith in his campaigning power, and are highly critical of the ineffectiveness of party leader Michael McCormack.

One of their key KPIs for McCormack has been that he must successfully pressure Morrison for the government to underwrite coal-fired generation.

But McCormack hasn’t been able to deliver, and that became obvious on Monday, when Morrison indicated the government won’t be nominating a Queensland coal project for underwriting.

“For such a project to proceed, it would require the approval of the Queensland state government,” the Prime Minister said.

“Now, the Queensland state government has no intention of approving
any such projects at all. So I tend to work in the area of the
practical, the things that actually can happen”.

Annastacia Palaszczuk might derive some wry amusement to find the
PM sheltering behind her skirts.

The Queensland rebels are less amused, seeing this as evidence that
McCormack has lost the battle (if he ever joined it) and worrying the Prime Minister is “cutting Queensland adrift to sandbag Victoria”.

Morrison certainly knows that to embrace a coal project would be
counterproductive for the Liberals in Victoria, where a number of
seats are at risk.




Read more:
Politics with Michelle Grattan: Ian McAllister on voters and issues in the coming election


But it is not just Victoria, or even just Liberal seats.

A hard-fought state election is underway in NSW, and the Nationals have much at stake.

They have several seats on or near the north coast where concern about climate change would top commitment to coal.

Lismore is a case in point, where the Nationals have their member retiring, and polling is showing a strong Green vote.

The regional vote is seen as crucial to the NSW election outcome,
and it is very volatile.

The destabilisation in the federal party is the last thing the NSW
Nationals need right now. If the state Nationals do badly on March 23, there will be recriminations and that will flow back into the federal backbiting and panic.




Read more:
Mark Latham in the upper house? A Coalition minority government? The NSW election is nearly upon us and it’s going to be a wild ride


How McCormack will go managing his rebellious party in the coming
weeks is problematic.

He displays poor judgement under pressure, as he did on Monday, after Joyce said the Nationals could pursue policies in their own right because “we are not married to the Liberal Party”.

“I understand when you have a marriage that it’s a two-way
relationship,”. McCormack shot back. “You don’t always get what you
want, but you have to work together … That’s what I do with the
Liberals.”

The man who lacks “cut through” had cut through, in an unfortunate way, to Joyce’s marital failure.

On Monday night, the row over coal took a new turn, threatening a
dangerous further escalation.

A batch of moderate Liberals, in a co-ordinated effort, waded into the debate, with public comments opposing taxpayer funds being used to build or pay for any new coal-fired power station.

They included Trevor Evans, Jason Falinski, Tim Wilson (who likes to call himself “modern” rather than “moderate”), Trent Zimmerman, Jane Hume – and Dave Sharma, the candidate for Wentworth.

Their comments were made under the cover of supporting the Prime Minister, but they had been wanting to say their piece for quite a while.

Once again, raging energy and climate wars are burning out of control in government ranks.The Conversation

Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Why proposals to sell nuclear reactors to Saudi Arabia raise red flags



File 20190222 195861 1fyoxnd.jpg?ixlib=rb 1.1
Saudi Arabia has many possible motives for pursuing nuclear power.
TTstudio/Shutterstock.com

Chen Kane, Middlebury

According to a congressional report, a group that includes former senior U.S. government officials is lobbying to sell nuclear power plants to Saudi Arabia. As an expert focusing on the Middle East and the spread of nuclear weapons, I believe these efforts raise important legal, economic and strategic concerns.

It is understandable that the Trump administration might want to support the U.S. nuclear industry, which is shrinking at home. However, the congressional report raised concerns that the group seeking to make the sale may have have sought to carry it out without going through the process required under U.S. law. Doing so could give Saudi Arabia U.S. nuclear technology without appropriate guarantees that it would not be used for nuclear weapons in the future.

A competitive global market

Exporting nuclear technology is lucrative, and many U.S. policymakers have long believed that it promotes U.S. foreign policy interests. However, the international market is shrinking, and competition between suppliers is stiff.

Private U.S. nuclear companies have trouble competing against state-supported international suppliers in Russia and China. These companies offer complete construction and operation packages with attractive financing options. Russia, for example, is willing to accept spent fuel from the reactor it supplies, relieving host countries of the need to manage nuclear waste. And China can offer lower construction costs.

Saudi Arabia declared in 2011 that it planned to spend over US$80 billion to construct 16 reactors, and U.S. companies want to provide them. Many U.S. officials see the decadeslong relationships involved in a nuclear sale as an opportunity to influence Riyadh’s nuclear future and preserve U.S. influence in the Saudi kingdom.

Of the 56 new reactors under construction worldwide, 39 are in Asia.
IAEA, CC BY-ND

Why does Saudi Arabia want nuclear power?

With the world’s second-largest known petroleum reserves, abundant untapped supplies of natural gas and high potential for solar energy, why is Saudi Arabia shopping for nuclear power? Some of its motives are benign, but others are worrisome.

First, nuclear energy would allow the Saudis to increase their fossil fuel exports. About one-third of the kingdom’s daily oil production is consumed domestically at subsidized prices; substituting nuclear energy domestically would free up this petroleum for export at market prices.

Saudi Arabia is also the largest producer of desalinated water in the world. Ninety percent of its drinking water is desalinated, a process that burns approximately 15 percent of the 9.8 million barrels of oil it produces daily. Nuclear power could meet some of this demand.

Saudi leaders have also expressed clear interest in establishing parity with Iran’s nuclear program. In a March 2018 interview, Saudi Crown Prince Mohammed bin Salman warned, “Without a doubt, if Iran developed a nuclear bomb, we will follow suit as soon as possible.”

As a member in good standing of the Treaty on the Non-Proliferation of Nuclear Weapons, Saudi Arabia has pledged not to develop or acquire nuclear weapons, and is entitled to engage in peaceful nuclear trade. Such commerce could include acquiring technology to enrich uranium or separate plutonium from spent nuclear fuel. These systems can be used both to produce fuel for civilian nuclear reactors and to make key materials for nuclear weapons.

Adel Al-Jubeir, Saudi Arabia’s ambassador to the U.S., discusses his government’s concern about Iran’s nuclear program.

US nuclear trade regulations

Under the U.S. Atomic Energy Act, before American companies can compete to export nuclear reactors to Saudi Arabia, Washington and Riyadh must conclude a nuclear cooperation agreement, and the U.S. government must submit it to Congress. Unless Congress adopts a joint resolution within 90 days disapproving the agreement, it is approved. The United States currently has 23 nuclear cooperation agreements in force, including Middle Eastern countries such as Egypt (approved in 1981), Turkey (2008) and the United Arab Emirates (2009).

The Atomic Energy Act requires countries seeking to purchase U.S. nuclear technology to make legally binding commitments that they will not use those materials and equipment for nuclear weapons, and to place them under International Atomic Energy Agency safeguards. It also mandates that the United States must approve any uranium enrichment or plutonium separation activities involving U.S. technologies and materials, in order to prevent countries from diverting them to weapons use.

American nuclear suppliers claim that these strict conditions and time-consuming legal requirements put them at a competitive disadvantage. But those conditions exist to prevent countries from misusing U.S. technology for nuclear weapons. I find it alarming that according to the House report, White House officials may have attempted to bypass or sidestep these conditions – potentially enriching themselves in the process.

According to the congressional report, within days of President Trump’s inauguration, senior U.S. officials were promoting an initiative to transfer nuclear technology to Saudi Arabia, without either concluding a nuclear cooperation agreement and submitting it to Congress or involving key government agencies, such as the Department of Energy or the Nuclear Regulatory Commission. One key advocate for this so-called “Marshall Plan” for nuclear reactors in the Middle East was then-national security adviser Michael Flynn, who reportedly served as an adviser to a subsidiary of IP3, the firm that devised this plan, while he was advising Trump’s presidential campaign.

President Donald Trump, accompanied by national security adviser Michael Flynn and senior adviser Jared Kushner, speaks on the phone with King of Saudi Arabia Salman bin Abd al-Aziz Al Saud shortly after taking office, Jan. 29, 2017.
AP Photo/Manuel Balce Ceneta

The promoters of the plan also reportedly proposed to sidestep U.S. sanctions against Russia by partnering with Russian companies – which impose less stringent restrictions on nuclear exports – to sell reactors to Saudi Arabia.

Flynn resigned soon afterward and now is cooperating with the investigation into Russian interference in the 2016 campaign. But IP3 access to the White House persists: According to press reports, President Trump met with representatives of U.S. industry, a meeting organized by IP3 to discuss nuclear exports to Saudi Arabia as recently as mid-February 2019.

Rules for a Saudi nuclear deal

Saudi leaders have scaled back their planned purchases and now only expect to build two reactors. If the Trump administration continues to pursue nuclear exports to Riyadh, I believe it should negotiate a nuclear cooperation agreement with the Kingdom as required by U.S. law, and also take extra steps to reduce nuclear proliferation risks.

This should include requiring the Saudis to adopt the International Atomic Energy Agency’s Additional Protocol, a safeguards agreement that give the agency additional tools to verify that all nuclear materials in the kingdom are being used peacefully. The agreement should also require Saudi Arabia to acquire nuclear fuel from foreign suppliers, and export the reactor spent fuel for storage abroad. These conditions would diminish justification for uranium enrichment or opportunities for plutonium reprocessing for weapons.

The United States has played a leadership role in preventing nuclear proliferation in the Middle East, one of the world’s most volatile regions. There is much more at stake here than profit, and legal tools exist to ensure that nuclear exports do not add fuel to the Middle East fire.The Conversation

Chen Kane, Director, Middle East Nonproliferation Program, Middlebury

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Newsflash. The government doesn’t need to break up power companies in order to tame prices. The ACCC says so



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Victoria’s Loy Yang brown coal power station at night. Breaking up generation companies might do little to bring prices down.
Shutterstock

Tony Wood, Grattan Institute

Who wouldn’t want cheaper power?

And who wouldn’t enjoy a bit of a stoush between the big bad generators and the government, trying to break them up on our behalf?

Even if it was largely tangential to keeping prices low.

The “big stick” of forced divestiture, where the government through a court could order an energy company to sell off bits of itself, never made it to a vote in the final chaotic fortnight of parliament just finished.

It will be the subject of a Senate inquiry that will report on March 18. After that, parliament is set to sit for only seven days before the election, so its possible it’ll never happen, under this government.

The government’s bill is good in parts

Parts of its Treasury Laws Amendment (Prohibiting Energy Market Misconduct) Bill are uncontroversial.

The main trigger was the Australian Competition & Consumer Commission’s June report, Restoring Electricity Affordability and Australia’s Competitive Advantage.

It found against forced divestiture, but thought along similar lines to the government in some respects.

The legislation presented to parliament this month bans three types of misconduct:

  • electricity retailers’ failing to pass on cost savings
  • energy companies’ refusing to enter into hedge contracts (agreements to buy and sell at a particular price) with smaller competitors
  • generators’ manipulating the spot (short term) market, for example by withholding supply.

It imposes civil penalties for the first, forces companies to offer contracts for the second, and provides for divestiture orders for the third, after they have been recommended by the government and approved by the Federal Court.




Read more:
Consumers let down badly by electricity market: ACCC report


There are good reasons for the government to act on the three behaviours, although each of the its proposed solutions raises concerns.

The ACCC wants something similar but different

Firstly, the ACCC did not identify the legislation’s first target as a major cause of high prices. They did observe that it is complicated to shop around and the offers are confusing, and sometime next year Australian governments will force retailers in some states to offer fairer default offers at an affordable price.

But it not clear why the energy sector has been singled out as an industry whose retailers have to pass on cost savings, and not supermarkets or banks or airlines or petrol stations, or any other kind of industry.

Secondly, the ACCC most certainly did raise concerns about dominant generator-retailers preferring not to enter into hedge contracts with competitors, particularly in South Australia.




Read more:
FactCheck Q&A: are South Australia’s high electricity prices ‘the consequence’ of renewable energy policy?


It recommended that the Australian Energy Market Commission impose a “market making obligation” forcing large, so-called gentailers to buy and sell hedge contracts.

Its recommendation has the same intent as the one proposed by the government, although it has the advantage of being administered by a regulator that already exists.

Thirdly, the ACCC also concluded that concentration in the wholesale market means higher prices. Its report focused on the bidding activity of the Queensland government owned generator Stanwell Corporation.

Manipulation isn’t a major price driver

The Grattan Institute identified market manipulation by generators as a contributor to higher prices in our July 2018 report Mostly working: Australia’s wholesale electricity market.

But we found it made a much smaller contribution than high gas and coal prices and the closure of ageing coal generators.

We recommended a rule change to constrain generators’ bidding practices in specific circumstances.




Read more:
Why the free market hasn’t slashed power prices (and what to do about it)


The ACCC recommended giving powers to the Australian Energy Regulator to investigate and fix such problems.

It considered a divestiture mechanism of the kind in the government’s leglislation, but rejected it as extreme.

Its own less extreme recommendations would “if implemented, be a better means to restore competition to a level which serves consumers well”.

Breaking up corporations is a broader question

There may well be a case for breaking up corporations whose size prevents or substantially lessens competition. It happens overseas.

The government cites the example of the United States Sherman anti-trust legislation. It has been in place since 1890 and has been famously used to break up Standard Oil and AT&T. The ACCC does not have this power.

There is debate about whether it would work in the much smaller market of Australia.




Read more:
Uncomfortable comparisons. Why Rod Sims broke the ACCC record


Allan Fels, a former head of the Australian Competition and Consumer Commission a believes it would.

But quite sensibly he argues it should apply across the board, including sectors such as banking in light of the findings of the royal commission.

Ian Harper, who led the government’s 2015 competition review, is less convinced. However, he says if a divestment power is introduced, it should be introduced broadly.




Read more:
Harper Review: a mixed basket for Coles and Woolworths


It’s worth considering divestment powers broadly, rather than rushing to introduce them in one sector of the economy in what was to have been the leadup to Christmas because of a concern that its prices were too high.

The ACCC has already delivered a comprehensive report on the means to bring them down.

The government would be better served acting comprehensively on its recommendations.The Conversation

Tony Wood, Program Director, Energy, Grattan Institute

This article is republished from The Conversation under a Creative Commons license. Read the original article.

View from The Hill: Malcolm Turnbull and his NEG continue to haunt the government



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The former PM via twitter effectively inserted himself into Question Time – in real time.
Dan Himbrechts/AAP

Michelle Grattan, University of Canberra

If anyone needs further evidence of the self-defeating weird places
the Liberals seem to find themselves in, consider what happened on
Tuesday.

Malcolm Turnbull made another intervention in the political debate,
this time talking about the National Energy Guarantee, when he spoke
at an energy conference on Tuesday morning.

“I’ve strongly encouraged my colleagues to work together to revive the
National Energy Guarantee. It was a vital piece of economic policy and
had strong support, and none stronger I might say, than that of the
current Prime Minister and the current Treasurer,” he said.

This and the rest of Turnbull’s observations on energy policy provided
abundant material for a question time attack by a Labor party bloated
from dining on the unending manna that’s been flowing its way from
some political heaven.

As Scott Morrison sought to counter this latest attack by concentrating on
Labor’s substantial emissions reduction target (45% on 2005 levels by
2030), suddenly a tweet appeared from Turnbull.

“I have not endorsed “Labor’s energy policy”. They have adopted the
NEG mechanism,“ Turnbull said – adding a tick of approval – “but have
not demonstrated that their 45% emissions reduction target will not
push up prices. I encouraged all parties to stick with Coalition’s NEG
which retains wide community support.”

Here was the former PM effectively inserting himself into Question
Time – in real time.

Morrison quickly quoted from the tweet, but it couldn’t repair the
damage done by Turnbull’s earlier comments.

All round, it was another difficult day for the government on the energy front.

The Coalition parties meeting discussed its controversial plan
providing for divestiture when energy companies misuse market power,
with conduct that is “fraudulent, dishonest or in bad faith” in the wholesale market.

The government has put more constraints on its plan than originally
envisaged. Notably, rather than a divestiture decision resting with
the treasurer, it would lie with the federal court (although precisely what this would mean is somewhat unclear).

Treasurer Josh Frydenberg told a news conference: “This power will be on the advice
of the ACCC [the Australian Competition and Consumer Commission] to
the Treasurer, and then the Treasurer will make a referral to the
Federal Court. The Federal Court will then be empowered to make that
judicial order.”

There had already been backbench criticisms of the divestiture proposal expressed to Frydenberg last week; the changes dealt with some of these.

But the plan is still leaving some in Coalition ranks uneasy.

According to the official government version, in the party room 18
speakers had a say, with 14 supporting (though a couple of them were
concerned about the interventionism involved) and four expressing
varying degrees of reservation. No one threatened to cross the floor.

Backbench sources said the strongest critics were Jason Falinski,
Russell Broadbent, Tim Wilson and former deputy Liberal leader Julie Bishop,
while milder criticisms came from Craig Laundy, Scott Ryan and Jane
Prentice.

There were two main worries about the measure – the potential negative
impact on business investment and its inconsistency with Liberal party
free market principles.

Bishop – who, it might be recalled, was recently saying there should
be a bipartisan deal with Labor on the NEG – highlighted the
investment implications and the issue of sovereign risk.

She said: “This is not orthodox Liberal policy. We need to do more
consultation with the industry and we need to be cautious of
unintended consequences of forced divestiture”.

Addressing the concerns, Morrison told the party room that a variety
of principles were at play.

The energy sector was not “a free market nirvana” but rather “a
bastardised market,” he said. The law was targeted at situations where
sweetheart deals came at the expense of consumers.

Energy minister Angus Taylor said governments of the centre-right,
including the Menzies and the Thatcher governments, had acted to
ensure markets operated for consumers.

Taylor invoked an example of the beer drinkers against the brewers,
when Thatcher had been on the side of the beers drinkers.

Frydenberg produced a quote from Menzies’ “Forgotten People”
broadcasts about the need to balance the requirements of industry with
social responsibilities.

The legislation, which is opposed by Labor even with the changes, is
being introduced this week. But there is no guarantee that it can be
passed by the time of the election – not least because there are so
few sitting days next year.

So the most controversial part of the government’s “big stick”, which
has caused so much angst with business, may never become a reality.The Conversation

Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Labor’s battery plan – good policy, or just good politics?



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With the right settings, Labor’s new scheme could benefit householders as well as the grid itself.
Shutterstock.com

Guy Dundas, Grattan Institute

Federal Labor obviously likes the politics of giving rebates of up to A$2,000 each to 100,000 households of prospective voters so they can install domestic batteries. But is this good policy that will support Australia’s transition to a reliable, affordable, low-emissions energy system, or is it just middle-class welfare?

The Grattan Institute has previously been critical of solar subsidies similar to this program. In 2015 we found that household solar photovoltaic (PV) installations driven by state and federal government subsidies cost Australia around A$9 billion. Many solar incentive programs were uncapped, and their costs blew out as the price of PV systems dropped rapidly.

The parallels with battery technology are clear: batteries may be expensive and uncommon today, but many commentators expect them to drop rapidly in price.




Read more:
Households to get $2000 subsidy for batteries under Shorten energy policy


More recently, my colleagues and I have lamented the Victorian government’s return to the bad old days of solar subsidies. Its Solar Homes program promises A$1.24 billion in subsidies over 10 years and would roughly triple the level of household solar in Victoria. Yet most households will be financially better off installing solar even without this subsidy. If fully implemented, it will be a great waste of taxpayers’ money.

The case for public subsidies for household batteries is stronger than for household solar panels. Batteries are better able to help cut the cost of the entire energy system and so don’t just benefit the people who install them – they also benefit electricity consumers more generally. By releasing stored power when most needed, batteries can reduce reliance on expensive “peaking” power plants that operate only at times of high demand. And they can reduce the cost of expanding network capacity to supply all customers at peak times.

By contrast, solar primarily eats into midday demand, which is already low due to the output of the large existing fleet of solar panels. While solar has historically reduced peak demand to some degree, the Australian Energy Market Operator considers that this effect is reducing as solar has pushed peak demand later in the day.




Read more:
Slash Australians’ power bills by beheading a duck at night


Impact of rooftop solar PV on peak demand.
AEMO 2018, The NEM Reliability Framework

In a perfect world, households would have enough private incentive to install batteries when they benefit the entire system. If households faced higher electricity prices at times of peak demand, they would be rewarded for reducing system-wide costs by installing batteries.

But we do not live in this perfect world. Governments are reluctant to mandate that households pay higher prices during peak periods, and retailers find it hard to convince households to accept these more complex tariffs. Cost-reflective pricing is unlikely to become widespread any time soon, meaning there is a case for public subsidy to household batteries – provided the subsidies are capped, and end when battery prices inevitably fall.

Using smart controls to coordinate multiple batteries can maximise their benefits. These so-called “virtual power plants” allow the controller to reduce a household’s draw on the grid at peak times, thus reducing costs for both the household and the system. Federal Labor should increase the benefits of its policy by mandating that people who receive a subsidy participate in such a scheme, and by targeting installations to areas where the network most needs support.




Read more:
Virtual power plants are in vogue, but they can be like taking a sledgehammer to a nut


On balance, federal Labor’s policy appears to be a sensible step towards a smarter, lower-emissions electricity grid. It can be tweaked to maximise benefits to the whole system, not just to the lucky households that get government assistance. And its cost is capped, which reduces the risk of the sort of cost blowouts that have plagued solar subsidy schemes.

Unlike some of the Coalition’s policies, such as its plan to underwrite new generation, Labor’s battery policy is likely to help rather than hinder Australia’s energy transition.The Conversation

Guy Dundas, Energy Fellow, Grattan Institute

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Grattan on Friday: Labor’s energy policy is savvy – now is it scare-proof?


Michelle Grattan, University of Canberra

Hours before Bill Shorten delivered his energy policy on Thursday,
Scott Morrison’s office had circulated an attack.

Labor’s plan was for a “carbon tax”; the proposed subsidy for “pink
batteries” would leave households “$8000 out of pocket”.

It was a wild broadside that said much about how the government hopes
a massive scare campaign can be an effective front line weapon in next year’s election.

In 2016 Malcolm Turnbull declined to run a heavily negative campaign,
especially against Shorten personally. When things went pear-shaped he
was strongly criticised for his approach.

Tony Nutt, Liberal federal director at the time, speaking soon after
the election, defended the approach by saying research had confirmed
voters were sick of political aggression and wanted to see a positive
vision and plan. But others in the party were not convinced.

Labor, for its part, did very well with its “Mediscare”.

In more desperate circumstances and with a new leader, the Liberals at
the next election will go all out stoking fears. Morrison is a much
better negative campaigner than Turnbull ever could be: he delivers
lines sharply and is not troubled by inconvenient nuance.

The government, assisted by the cooling of the housing market, has
been stepping up its warnings about the effects on house prices of
ALP’s negative gearing plan. Labor’s proposed crackdown on cash
refunds from dividend imputation is also a ripe target, especially for
agitating retirees (although pensioners are exempt).




Read more:
Pensioners would retain cash refunds on franked dividends under Labor backdown


And now that Shorten has released the energy policy this week, the
Coalition is reaching back into the past for lines and spectres.

Labor’s promise to subsidise home batteries ($2000 for
households with incomes under $180,000) is dubbed “pink batts to pink batteries” to trigger memories of Kevin Rudd’s ill-prepared policy that cost several lives.

Energy Minister Angus Taylor went for the ultimate try-on, when he
posed outside the Tomago Aluminium Smelter in Newcastle and claimed
that “if all of Bill’s batteries were installed, it would keep this
smelter, this business, going for less than 15 minutes”. “Bill’s
batteries” are not, of course, aimed at powering Tomago.

The old line about the ALP putting a “wrecking ball” through the
economy with its policy is getting a fresh workout.




Read more:
Households to get $2000 subsidy for batteries under Shorten energy policy


In crafting its energy policy, Labor is drawing on different, more
recent history – the widespread support from the business community
and other stakeholders for the National Energy Guarantee that the
Coalition abandoned amid its leadership meltdown.

Shorten says a Labor government would try to get bipartisan agreement for a NEG, but not rely on doing so.

In an interventionist approach, Labor proposes an additional $10
billion for the Clean Energy Finance Corporation; its investments
would support large scale generation and storage projects.

Labor’s investment would be in renewables, pushing towards its target
of 50% of Australia’s energy coming from renewables by 2050. In
contrast, the government is planning early next year to have a “short
list” of dispatchable power projects, focusing on coal, gas and hydro,
that it will look at underwriting.

An ALP government would also provide $5 billion for “future-proofing”
the energy network – the transmission and distribution systems.

Labor’s energy policy is in the context of its commitment to a much
more ambitious emissions reduction target than the government has – a
45% economy-wide reduction by 2030 on 2005 levels, compared with the
Coalition’s 26%-28%.

This week’s announcement is about the energy
sector only – the opposition will release soon its climate change
policies to lower emissions in other sectors including
transport. The government, homing in on the 45% target, is conjuring up scares about the nation’s cattle herd and the like.

Labor claims its energy policy would drive power prices down; the
government says it would drive them up. In fact no one can be sure
what will happen in the next few years in a situation where we are
undergoing a major transition to a different energy mix.

Nor is it clear which side will win the coming debilitating round of the
energy-climate wars.

The ALP would be unwise to underestimate the power of the scare. On
the other hand, the government’s own policy looks like a
shredded garment now it has torn up the NEG. Its “big stick’,
including the threat of divestitures, and its promised “short list” of new
dispatchable power projects don’t really cut it.

Labor would be heartened by the early responses its policy is
receiving from business groups, despite their reservations.

In a crack at the government’s threat, the Business Council of
Australia welcomed “Labor’s commitment not to support heavy-handed,
intrusive changes into the energy sector such as forced divestiture”.

Most notable in the reaction of these groups, however, was their
hankering for the NEG.

The Ai Group said a revised NEG was “still achievable” and “would be
greatly preferable” to a government directly underwriting new
generation, versions of which were being proposed by both major
parties. The BCA was pleased Labor was taking the NEG to the election,
reiterating that it was “a credible, workable, market-based solution
to the trilemma of affordability, reliability and reducing our
emissions”. The Australian Chamber of Commerce and Industry was
likewise encouraged by the reference to the NEG.

This indicates that Labor’s decision to include the NEG in its plan is
not just sound on policy grounds but is politically savvy. By keeping
alive the NEG option, Labor has reached out to business.

Surely many Liberals are now starting to think that far from giving
themselves a break against Labor by rejecting the NEG, they may have
put themselves at a serious disadvantage which could be hard to
overcome even with a fierce scare campaign.

This also raises an interesting question for after the election, if
Labor wins. Given the widespread support for a NEG, would a Coalition
opposition persist in rejecting it? Much would depend on the factional
make up of the Liberal party of the day.The Conversation

Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Households to get $2000 subsidy for batteries under Shorten energy policy


Michelle Grattan, University of Canberra

A Labor government would subsidise households to install batteries as part of the ALP’s energy policy to be unveiled by Bill Shorten on Thursday.

If Labor wins next year’s election, it would provide from 2020 a A$2000 rebate for 100,000 households, with annual incomes of less than $180,000, to buy and install battery systems. It would also provide low cost loans.

The ALP puts its emphasis on boosting the use of renewables, in a policy that keeps the National Energy Guarantee – abandoned by the government in the leadership meltdown – as an option on the table. The opposition indicates it is prepared to implement the NEG but its policy is providing for the future if agreement on it cannot be reached.

The ALP estimates the battery subsidy would triple the number of battery systems in Australian households. The policy sets a national target of one million household battery installations by 2025.

“The massive boost will also help manufacturers scale up production and reduce their costs”, Shorten and energy spokesman Mark Butler said in a statement.

They said the ALP policy would “help Australians slash their power bills.”

“The Smart Energy Council estimates that new household solar and batteries would allow most homes to save more than 60 per cent off their power bills”, Shorten and Butler said.

“Australians love renewable energy because they know it saves them money and it’s good for the environment”, they said, pointing out that household solar installation had rising from 7000 homes in 2007 to 1.8 million today.

“Supporting the installation of more household battery systems is the next big step in helping families keep their energy bills lower. When the sun goes down, or when electricity usage is at its peak, consumers can draw on their own stored energy”, Shorten and Butler said.

They said this was good for both consumers and the environment. People gained more control over their power bills, and cheaper and cleaner energy would help Australia achieve 50% of power from renewables by 2030.

A Labor government would also invest $100 million in a Neighbourhood Renewables Program, so renters and people in social housing could benefit from cheaper and cleaner energy.

The cost of the battery subsidy and the neighbourhood scheme is estimated at $215.9 million over the current forward estimates. The costing has been done by the independent Parliamentary Budget Office.

Shorten and Butler said Labor would “establish community power hubs to support the development of renewables projects in local communities – such as solar gardens on apartment rooftops, community wind farms, energy efficiency upgrades for social housing and grants for community groups to pilot new projects.”

They said the new initiatives built on Labor’s commitments to crack down on price gouging by power companies.

Labor’s policy on energy would create thousands of jobs in the renewable industry, they said.

In a speech to be delivered on Thursday, Shorten stresses a Labor government would seek bipartisanship on the NEG.

“We want a meaningful NEG that actually lowers prices, reduces pollution, and boosts renewables” he says in an extract released ahead of delivery.

“If I am elected as prime minister, I will sit down with the new opposition leader and the crossbench to talk about a way we can move forward with this framework,”

“But let’s be clear: we will work with the Coalition – but we will not wait for them. Our willingness to cooperate on a market mechanism doesn’t mean everything else gets put on hold,” Shorten says.

He says a Labor government would be prepared to directly underwrite and invest in cleaner cheaper power.

“We will prioritise renewables and support firming technology power like storage and gas. Labor will invest in new generation, in better transmission and distribution – because we realize this vital nation-building work cannot be left up to the big power companies.” Labor’s plan would deliver affordability, reliability and sustainability, Shorten says.

Labor’s battery subsidy program would be reviewed after two years, in light of projected falls in battery costs and to assess progress towards the one million new battery installations by 2025 target.The Conversation

Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

State governments can transform Australia’s energy policy from major fail to reliable success


Tony Wood, Grattan Institute and Guy Dundas, Grattan Institute

This week we’re exploring the state of nine different policy areas across Australia’s states, as detailed in Grattan Institute’s State Orange Book 2018. Read the other articles in the series here.


Energy policy in Australia is a major failure. The federal government has been unable to forge an effective policy to ensure affordable, reliable and low-emissions electricity. It’s time for the states to step up.

Internationally, responsibility for climate change policies rests with national governments. The federal government says it remains committed to Australia’s target under the Paris Agreement, but it has abandoned the emissions-reduction obligation of the National Energy Guarantee (NEG). This leaves Australia’s electricity sector, which is responsible for 34% of our overall emissions, with no credible policy to reduce those emissions.

The states should fill this policy vacuum if it persists. They should work together on a nationwide emissions reduction scheme through state-based legislation, independent of the federal government. A Commonwealth-led national policy would be best, but a state-based policy is far better than none.




Read more:
The too hard basket: a short history of Australia’s aborted climate policies


In October 2018 the COAG Energy Council agreed to continue work on the reliability element of the NEG. The states and territories should maintain this support and implement this policy with the Commonwealth government, and so support the reliability of the National Electricity Market during a challenging transition.

The Grattan Institute’s State Orange Book 2018 shows that there is also much the states can do to reduce energy prices. Consumers are understandably upset – household retail prices have increased by more than half in the past decade, according to the Australian Competition and Consumer Commission (see page 7 here).

How your state measures up on energy.
Grattan Institute State Orange Book 2018

The federal government is certainly focused on price – Prime Minister Scott Morrison has referred to Energy Minister Angus Taylor as the “minister for getting electricity prices down” – but many important pricing policies depend on state action.

Retail pricing is the obvious example. Poorly regulated retail electricity markets have not delivered for consumers. Retail margins are higher than would be expected in a truly competitive market. Many consumers find the market so complicated they give up trying to understand it.




Read more:
A high price for policy failure: the ten-year story of spiralling electricity bills


State governments should work alongside the federal government to help consumers navigate the retail “confusopoly”. Governments should require retailers to help consumers compare offers and get the best deal. They should also stop retailers using excessive pay-on-time discounts (which tend to confuse rather than help consumers and can trap lower-income households), and ensure vulnerable customers do not pay high prices.

However, governments should resist the temptation to use price caps as a quick fix. If set too low, price caps could reduce competition and drive longer-term price increases.




Read more:
Capping electricity prices: a quick fix with hidden risks


Western Australia, Tasmania and the Northern Territory, which have not yet adopted retail competition, should move in that direction – while learning from the mistakes of others.

Network costs make up the biggest share of the electricity bill for most households (see page 8 here) and some small businesses. This is particularly an issue in New South Wales, Queensland and Tasmania, where network values increased substantially under public ownership and those costs were passed on to consumers.

These states should write down the value of their overvalued networks or provide rebates to consumers, so the price of the networks is more closely aligned to the value they provide to consumers. Given the poor performance of publicly owned networks, any network businesses still in government hands should be privatised.

Responsibility for setting network reliability requirements should be transferred to the Australian Energy Regulator to prevent risk-averse state governments from imposing excessive reliability standards, which would drive up network costs again.




Read more:
Amid blackout scare stories, remember that a grid without power cuts is impossible… and expensive


Until recently, it seemed state governments had learned the lessons from the bad old days of excessively generous subsidies for rooftop solar. That was until August 2018, when the Victorian government committed more than A$1 billion to pay half the cost of solar panels for eligible households and provide an interest-free loan for the remainder. Most of these systems would pay for themselves without subsidy. The Victorian government should abandon this waste of taxpayers’ money.




Read more:
Policy overload: why the ACCC says household solar subsidies should be abolished


Finally, Australia’s gas market is adding to the price pain of homes and businesses. As international prices rise, there is no easy way to avoid some painful decisions. But some state policies are making matters worse.

The Victorian and Tasmanian governments’ moratoria on gas exploration and development constrain supply and drive up prices. The moratoria should be lifted. Instead, these states should give case-by-case approval to gas development projects, with safeguards against specific risks.

Australia needs reliable, affordable electricity to underpin our 21st-century economic prosperity. That must be protected while we also decarbonise the energy sector.

Energy market reform was at the forefront of national competition policy in the mid to late 1990s. But reform has since slowed, and the states are partly responsible. The states can rekindle the fire by pursuing a clear, nationally consistent action plan for affordable, reliable and low-emissions electricity.

Australia’s households and businesses – and the environment – are relying on the states to step up.The Conversation

Tony Wood, Program Director, Energy, Grattan Institute and Guy Dundas, Energy Fellow, Grattan Institute

This article is republished from The Conversation under a Creative Commons license. Read the original article.

At its current rate, Australia is on track for 50% renewable electricity in 2025


Ken Baldwin, Australian National University; Andrew Blakers, Australian National University, and Matthew Stocks, Australian National University

The Australian renewable energy industry will install more than 10 gigawatts of new solar and wind power during 2018 and 2019. If that rate is maintained, Australia would reach 50% renewables in 2025.

The recent demise of the National Energy Guarantee saw the end of the fourth-best option for aligning climate and energy policy, following earlier vetoes by the Coalition party room on carbon pricing, an emissions intensity scheme, and the clean energy target.




Read more:
The renewable energy train is unstoppable. The NEG needs to get on board


Yet despite the federal government’s policy paralysis, the renewable energy train just keeps on rolling.

Our analysis, released today by the ANU Energy Change Institute, shows that the Australian energy industry has now demonstrated the capacity to deliver 100% renewable electricity by the early 2030s, if the current rate of installations continues beyond the end of this decade.

Record-breaking pace

Last year was a record year for renewable energy in Australia, with 2,200 megawatts of capacity added. Based on data from the Clean Energy Regulator, during 2018 and 2019 Australia will install about 10,400MW of new renewable energy, comprising 7,200MW of large-scale renewables and 3,200MW of rooftop solar (see charts below). This new capacity is divided roughly equally between large-scale solar photovoltaics (PV), wind farms, and rooftop solar panels. This represents a per-capita rate of 224 watts per person per year, which is among the highest of any nation.

Actual and probable deployment of large-scale (more than 0.1MW) systems in Australia. About 4,000MW per year is currently being installed.
Clean Enegy Regulator/ANU, Author provided
Annual small-scale (less than 0.1MW) rooftop PV capacity additions including an estimate of 1,600MW for the whole of 2018 based on installations for the year to June.
Clean Energy Regulator/ANU, Author provided

If the current rate of renewable energy installation continues, Australia will eclipse the large-scale Renewable Energy Target (LRET), reaching 29% renewable electricity in 2020 and 50% in 2025. It may even surpass the original 41 terawatt-hour (TWh) target, which was downgraded by the Abbott government to the current 33 TWh.

Our projections are based on the following assumptions:

  • demand (including behind-the-meter demand) remains constant. Demand has changed little in the past decade

  • large- and small-scale solar PV and wind power continue to be deployed at their current rates of 2,000MW, 1,600MW and 2,000MW per year, respectively

  • large- and small-scale solar PV and wind continue to have capacity factors of 21%, 15% and 40%, respectively

  • existing hydro and bio generation remains constant at 20 terawatt-hours per year

  • fossil fuels meet the rapidly declining balance of demand.

No subsidies needed

Renewable energy developers are well aware of these projections, which indicate that they believe that little or no financial support is required for projects to be competitive in 2020 and beyond.

Indeed, the current price of carbon reduction from the government’s existing Emissions Reduction Fund (A$12 per tonne, equivalent to A$11 per MWh for a coal-fired power station (at 0.9 tonnes per MWh), would be sufficient to finance many more renewable energy projects.

The current deployment rate might continue because:

  • large-scale generation certificates will continue to be issued by the Clean Energy Regulator to accredited new renewables generators right up until 2030

  • renewable investment opportunities are broadening beyond the wholesale electricity market, as companies value the economic benefits and green profile of renewable energy supply contracts. For example, British steel magnate Sanjeev Gupta has announced plans to install more than 1GW of renewable energy at the Whyalla steelworks, and Sun Metals in Townsville has already installed 125MW of solar capacity

  • the price of wind and PV will continue to fall rapidly, opening up further market opportunities and putting downward pressure on electricity prices

  • increased use of electric vehicles and electric heat pumps for water and space heating are expected to increase electricity demand. This increased demand is expected to be met by wind and solar PV, which represent almost all new generation capacity in Australia

  • retiring existing coal power stations are being replaced by PV and wind.

A renewables-powered grid

As the electricity sector approaches and exceeds 50% renewables, more investment will be required in storage (like batteries and pumped hydro) and in high-voltage interconnections between regions to smooth out the effects of local weather and demand.

We have previously shown the hourly cost of this grid balancing is about A$5 per MWh for a renewable energy fraction of 50%, rising to A$25 per MWh at 100% renewables.

Modelled increase in annual PV and wind generation (TWh) and the consequent reduction in fossil generation based on extrapolation of current industry deployment rates for renewables.
ANU, Author provided

What do our projections mean for Australia’s greenhouse gas emissions? In 2017 these emissions were 534 megatonnes (MT). Under the Paris Agreement, Australia has undertaken to reduce greenhouse gas emissions by 26%, from 612MT per year in 2005 to 453MT per year by 2030. This is a reduction of 81MT per year from current emissions.

We assume that all emission reductions are obtained within the electricity system through progressive closure of black coal power stations, which emit an average of 0.9 tonnes of carbon dioxide per MWh of electricity.

On this basis, emissions in the electricity sector will decline by more than 26% in 2020-21, and will meet Australia’s entire Paris target of 26% reduction across all sectors of the economy (not just “electricity’s fair share”) in 2024-25.




Read more:
The government is right to fund energy storage: a 100% renewable grid is within reach


Our analysis shows Australia’s renewable energy industry has the capacity to deliver deep and rapid emissions reductions. Direct government support for renewables would help, but it is no longer vital.

Government support for stronger high-voltage interstate interconnectors and large-scale storage projects (like the Snowy 2.0 pumped hydro proposal) will allow 50-100% renewables to be smoothly integrated into the Australian grid. What is crucial is government policy certainty that will enable the renewable industry to realise its potential to deliver deep emissions cuts.The Conversation

Ken Baldwin, Director, Energy Change Institute, Australian National University; Andrew Blakers, Professor of Engineering, Australian National University, and Matthew Stocks, Research Fellow, ANU College of Engineering and Computer Science, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Explainer: what is energy security, and how has it changed?


Samantha Hepburn, Deakin University

The idea of energy security has been at the centre of much policy debate recently. The federal government defines energy security as the adequate supply of energy across the electricity, gas and liquid fuel sectors.

But this notion has become outdated, following the spate of electricity blackouts that have occurred in the past few years. The concept of energy security is now increasingly synonymous with resilience: responding to problems quickly and avoiding power outages.




Read more:
Trust Me I’m An Expert: Why February is the real danger month for power blackouts


To be secure, the national energy market must ensure a sufficient supply of electricity at an affordable price and be able to respond to major disruptions. Being “energy secure” in this context now means having a backup plan. Unfortunately, Australia doesn’t.

All about oil

Historically, energy security was purely about oil supply. It evolved as a policy response to the 1973 Arab oil embargo. At the time, the aim was to coordinate among the industrialised countries if supply was disrupted, to avoid future supply problems and to deter exporters from using resources as a strategic weapon. Four key developments emerged from the embargo:

  • the International Energy Agency (IEA), whose members are the industrialised countries;

  • strategic stockpiles of oil, including the US Strategic Petroleum Reserve;

  • continued monitoring and analysis of energy markets and policies; and

  • energy conservation and coordinated emergency sharing of supplies in the event of a disruption.

Australia is not ‘secure’

When Australia joined the IEA in 1979, it was a net exporter of oil and was therefore exempt from the requirement to stockpile liquid fuel. Since this time, however, Australia’s oil production has peaked and is now in decline.

Reasons for this are various but include the reduction in oil refining capacity and significant increases in reliance on imported oil products.

In 2012 Australia became non-complaint with the IEA requirement that all members maintain oil stocks equivalent to at least 90 days of the previous year’s daily net oil imports.

In contrast with many other IEA members, Australia does not have a public (or government-owned) stockpile of oil and has instead relied on commercially held stocks. Currently, Australia has an aggregated fuel reserve of roughly 48 days, including about 22 days’ supply of crude oil, 59 days of LPG, 20 days of petrol, 19 days of aviation fuel, and 21 days of diesel.




Read more:
Australia’s fuel stockpile is perilously low, and it may be too late for a refill


This lack makes Australia very vulnerable in a crisis – 98% of our transportation relies on liquid fuel, as do all of our major defence platforms. An extended disruption means our economy, policy force and army could cease to function.

While the federal government intends to return to compliance by 2026, our ongoing failure to understand and respond to a changing environment has resulted in us becoming, at least in the context of liquid fuel, energy “insecure”.

Are we ready for a new approach?

The modern energy landscape is complex, and energy security is a much broader and more dynamic concept than it was thirty years ago. Public expectations have also evolved. Australia must address a multitude of new challenges that include: climate change, integrating renewable energy, rising peak demand, rising domestic gas prices and a raft of new geopolitical rivalries.

In many parts of the world, mechanical and analogue systems traditionally powered by oil-products, have been replaced with automated and networked systems that run on electricity. As a result, the number of digitally connected devices has grown from 400 million in 2001 to in excess of 25 billion in 2018.

These changes make electricity and natural gas, in addition to oil, key supports of many facets of society. They ensure that the modern world is completely dependent on energy generation. Within this context, resilience is a critically important requirement.

Future energy systems, responsive to this enlarged concept of energy security will therefore look very differently. Large fossil fuel and synchronous generators will be replaced by a clean electricity system composed of small-scale, clean asynchronous generators. It will mix large renewable projects (which will mean extending the physical transmission network) with distributed energy generation (for example, from rooftop solar), and the network will require new systems to ensure coordination and stability.

Renewable energy is an important component of energy security but it works differently to fossil fuels. For example, inertia functions differently. Inertia is the capacity of a power system to respond to unexpected shocks, and its ability to react and stabilise the system’s balance.

Inertia slows down the rate at which frequency changes after a disruption in the grid, such as the failure of a power plant or a transmission line. Inertia has traditionally been provided by fossil fuel generators. However, within a mixed energy framework, renewables will provide synthetic inertia. For example, modern wind turbines can use the kinetic energy stored in the generator and blades to be responsive during grid stress. This can provide an efficient injection of power into the grid where it is required, and the delivery can be flexibly controlled to suit regional grid conditions. New storage technologies will, however, need to be incorporated into networks early so their application in practice can be understood.

These are all responses to a new understanding of energy security. Today, what is essential to the definition of energy security is not just an adequate supply of energy at an appropriate price but an adequate supply of sustainable, resilient energy at an appropriate price, which is responsive to the demands of a decarbonising economy.




Read more:
At its current rate, Australia is on track for 50% renewable electricity in 2025


In light of this, energy security is perhaps even more crucial in our modern world than it was back in 1973. Understanding the evolving meaning of energy security means we are better equipped to comprehend the different ways in which our global interconnection can make us vulnerable.

We need to minimise risk and reduce exposure. We need to imagine what a secure energy framework of the future looks like. We need energy policy that is more responsive to the social, economic and environmental demands of modern Australia.The Conversation

Samantha Hepburn, Director of the Centre for Energy and Natural Resources Law, Deakin Law School, Deakin University

This article is republished from The Conversation under a Creative Commons license. Read the original article.