Governments took the hard road on clean energy – and consumers are feeling the bumps



Prime Minister Scott Morrison (right) and Energy Minister Angus Taylor at Snowy Hydro Scheme. The Grattan Institute says the government should better encourage investment rather than build electricity infrastructure.
LUKAS COCH/AAP

Guy Dundas, Grattan Institute

More than two years on from the sudden closure of Victoria’s Hazelwood coal power station, quite a mess remains. It is clear the federal government’s market interventions have not worked. Electricity prices are higher and supply is tight. Consumers are not happy.

In the face of this, federal and state governments have felt pressured to act – especially after several severe blackouts attracted fever-pitch media coverage and prompted a national debate about electricity reliability. But their approach has been ad hoc and has made things worse in the long run.

Australia is in the midst of a great energy transition. The nation’s entire coal fleet will close over the next few decades, and the government must urgently improve its policy response or electricity consumers will continue to suffer. We propose a solution that ensures coal plants close in an orderly way.

A high-voltage electricity transmission tower in Brisbane. A new report says governments are hindering the clean energy transition.
AAP/Darren England

We can’t afford a repeat of the Hazelwood mess

The aftermath of the sudden Hazelwood closure is a good case study in failed government intervention.

Hazelwood closed in March 2017 after supplying Victoria with cheap brown coal-fired electricity for more than half a century. The plant’s owner, French energy company Engie, gave only five months’ notice of the shutdown. This left no time to build replacement electricity generation, so prices rose and supplies became less reliable.

In the years since Hazelwood’s closure, the federal government failed to clear up more than a decade of uncertainty around national climate and energy policy – including last year when it dumped the National Energy Guarantee. This has left investors wondering when a framework to cut emissions in the electricity sector will be imposed.

Instead of creating investor certainty, the federal government has adopted a “picking winners” approach. It plans to build new generation assets such as the Snowy 2.0 pumped hydro project, and subsidise others through a program of underwriting investments. Alongside this, the government’s proposed “big stick” laws would give it vast powers including those to break up big energy companies. Our research has confirmed this has a chilling effect on investment.

The sudden closure of large coal power stations is challenging enough without being made worse by ill-conceived policy responses. Hazelwood will be the first of many closures. Australia’s entire coal fleet is expected to retire over coming decades as it ages and gets displaced by low-cost solar and wind energy.



The Grattan Institute, CC BY-ND

Flogging the life out of coal plants is not the answer

The crucial lesson from Hazelwood is that Australia needs adequate notice of impending coal plant closures. This allows timely replacement investment to occur, minimising the price and reliability impacts on consumers.

New South Wales’ Liddell power station is due to close next and its owner AGL has given plenty of notice. In 2015 it announced a 2022 closure, and this year firmed up its plans for full closure by 2023. One unit of four will close in 2022.




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Federal Energy Minister Angus Taylor is so concerned at Liddell’s closure he set up a taskforce to examine how to manage it, including extending its life or replacing the lost generation like-for-like.

But his concerns are misplaced. The Australian Energy Market Operator’s 2019 reliability projection for New South Wales is that the outlook is improving more rapidly than it was in 2018. About 2.3 gigawatts of solar and wind energy has been committed in NSW since the start of 2017 – and more is planned.

The best way to maintain reliability is through investment – not by trying to keep an ageing power station running on hot summer days.

The now-closed Hazelwood coal-fired power station in the Latrobe Valley, Victoria.
Global Warming Images/Cover Images

Laws on coal plant closures must grow teeth

Liddell’s closure is very likely to prove manageable. But this cannot be taken for granted in all future cases.

A new rule introduced late last year requires generators to give at least three years’ notice of closure. It’s a step in the right direction, but the rule lacks teeth. The penalties for non-compliance are small, and the mechanism could be gamed by generators nominating a closure date and then continuously delaying closure. We need better insurance to avoid future disruptive closures.

Past Australian experience gives some lessons on what not to do. In 2011 the Gillard Labor government proposed paying coal generators to close, on the grounds that otherwise they might continue operating indefinitely. Four of the five short-listed generators have since closed – without being paid a cent of government money. We are now dealing with the opposite problem, but the lesson holds – taxpayers will be taken for a ride if government money is used to delay or otherwise “manage” coal closures.

International experience is not likely to translate well to Australia. Germany’s coal closure commission built on deep cooperation between business, unions and governments that is not present here. The UK and Canada legislated coal phase-outs, but they did so at a time when coal provided only 10% of their power, compared to more than 60% in Australia today.

Prime Minister Julia Gillard during a visit to the Acciona windfarm near Gunning, NSW, in 2011. Labor’s incentives for coal stations to close were also misguided.
AAP/Alan Porritt

Make coal plants guarantee orderly closure

The Grattan Institute’s latest report, Power play: how governments can better direct Australia’s electricity market, proposes a new approach. Coal generators should be required to put money – indicatively several hundreds of millions of dollars each – into a fund, managed by an independent third party, to be held as security. Generators would be allowed to nominate their own closure window, but would get these funds back only if they closed within this window – providing a strong financial incentive for predictable and orderly closure.

Circumstances change and generators cannot reasonably fix closure decades in advance. To balance flexibility and certainty, younger generators would be allowed to nominate relatively long windows, but they would need to tighten these windows as they age.




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Limited exemptions would be available if early closure did not harm the reliability of the market, or conversely if continued operation of the coal plant in question was absolutely necessary to maintain reliability.

This policy would come with costs. Collectively generators would need to place several billions of dollars into the fund. As generators have a higher cost of capital than would be earned on the held funds, this would cost them, collectively, several hundreds of millions of dollars a year. But the measure would provide low-cost insurance against the destabilising effect of poorly managed coal closures on the A$18 billion National Electricity Market.

The policy would give a clear signal for investment in new, clean power supply before – not after – coal closures, and better manage 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.

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Australia’s energy woes will not be solved by reinforcing a monopoly



Australia’s energy market has a logjam,
Sean Davis/Flickr, CC BY-NC-SA

Bruce Mountain, Victoria University

The possibility of blackouts affecting half of Victoria has attracted plenty of attention to a document once read only by industry insiders and policy wonks: the Electricity Statement of Opportunities.

The Statement, updated every year by the Australian Energy Market Operator (AEMO), forecasts 10-year supply and demand in the main grids that serve the Australia’s south and eastern states.

But the chance of huge blackouts is just part of the Statement – and in fact it reveals a growing tension between the market operator and the bodies that oversee electricity regulations.




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Blackouts unlikely

So, what does the latest Statement say? The good news is AEMO calculates the expected level of “unserved energy” – that is, demand that cannot be met by supply – is likely to be fairly low, which makes blackouts unlikely.

The bad news is AEMO thinks a standard based on “expected unserved energy” is a poor way to forecast keeping the lights on.

Instead, AEMO points to the unlikely events that nonetheless could have a significant impact on consumers and says we should frame reliability obligations around those.




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In its analysis of these, AEMO finds it is possible (albeit unlikely) about half of Victoria’s households could lose supply in a single event in the coming year.

So, on the one hand AEMO expects the system will basically meet the current obligations for unserved energy, but it also says there is nonetheless the possibility half of Victoria’s homes could suffer outages because of shortfalls on the main power system.

Importantly, as AEMO’s obligation is to hit the expected unserved energy standard, not beat it, it is not authorised to take actions to mitigate these outside possibilities.

Market vs regulators

To really understand the issues here, we need to look back to last year. In 2018, AEMO sought to change Australia’s energy regulations so AEMO could buy as much reserve capacity as it decided was needed to reliably manage unlikely but possible severe failures.

It also asked for the authority to buy reserves for longer periods so that it could source reserves more cheaply.

The Australian Energy Market Commission (AEMC) that sets the rules rejected this application on the basis that the standards were already high enough – maybe even too high – and AEMO was unduly risk-averse (the political risk associated with power failures made it so). By implication, left to its own devices AEMO would look after itself, at customers’ expense.

Whatever the stated rationale, underlying AEMC’s rejection of AEMO’s application is the philosophy of the sanctity of the market: wherever possible, the market is to be protected from intervention.

From the regulator’s perspective, were it to have acceded to AEMO’s request to expand the volume of reserves AEMO bought outside the market, it would be buying reserves it did not need and allowing the price signals in the market to be further undermined.

But I would argue the regulator’s decision is better characterised as protecting the National Electricity Market’s monopoly for the exchange of wholesale electricity.

It may be acceptable to force transactions through a market if there is confidence in that market. But the evidence of market failure is abundant: wholesale prices in Victoria at record highs, rampant exercise of market power, reliability concerns that often make the front page, and in certain cases shortfalls in dispatchable capacity, storage and price-responsive demand.




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New demand-response energy rules sound good, but the devil is in the (hugely complicated) details


In its Statement, AEMO signalled it will work with Victoria’s state government to explore ways they can work together to meet Victoria’s reliability needs, in spite of the AEMC’s decision.

This is a very significant development and I envisage it will presage similar bilateral arrangements between AEMO and other states.




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Should we be worried about this? Not in the least. Electricity markets do not spontaneously arise; they are administrative constructions. For too long the National Electricity Market has had a monopoly on the exchange of wholesale electricity and the AEMC has had a monopoly on its oversight. Monopolies and markets ossify when they get stuck in their originating orthodoxy and ideology.

AEMO is beginning to clear a log jam. There is a spirit of innovation and discovery in the air. This is something to welcome and it is not a moment too soon.The Conversation

Bruce Mountain, Director, Victoria Energy Policy Centre, Victoria University

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

New demand-response energy rules sound good, but the devil is in the (hugely complicated) details



Demand response sounds good, but is punishingly difficult to execute.
Matthew Henry/Unsplash, CC BY-SA

Bruce Mountain, Victoria University

Last week the body that governs Australia’s energy market released a draft proposal to introduce a demand response mechanism to the wholesale electricity market.

It argues the proposal will unearth some electricity users’ “latent flexibility” to prices in the extremely volatile wholesale market, and that this will potentially promote more efficient use of electricity, more secure power systems, and lower prices.

The move comes after nearly two decades of sustained campaigning, which prompts the question: why doesn’t such a useful-sounding mechanism already exist?




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It’s a good question. If this demand-response mechanism does what it is claimed to do, it could be a significant development for the electricity markets in southern and eastern Australia. But the actual proposal is eye-wateringly complex and there is reason to be circumspect.

What is proposed and how does it work?

The Australian Energy Market Commission’s determination is that new market participants, to be known as “Demand Response Service Providers” (DRSPs), will be allowed to offer hypothetical demand reductions into the wholesale market at prices they determine. If the price they offer for such reductions is less than the price at which the market clears, the DRSPs will be paid the market price, as if they were a generator, for these hypothetical reductions.

One obvious difficulty here is the fact that the reductions are hypothetical. They are the difference between the customers’ demand if they did not respond to an enticement to reduce demand – the “baseline” – and their actual demand. Customers (and DRSPs) have an incentive to overstate the baseline, as this increases the volume of the reductions they offer and, if accepted, get paid for.

DRSPs profit from the demand reductions they sell, and so they have an incentive to seek out customers who are willing to reduce demand relative to the baseline.

Retailers that sell electricity to DRSPs’ customers will buy (from the wholesale market) the actual volume of electricity consumed and also the hypothetical demand reduction, and pay the wholesale price for both. The retailer charges the customer for the actual demand and charges the DRSP for the demand reduction at a regulated price equal to the 12-month load-weighted average wholesale price.




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This will typically leave the retailer out of pocket by an amount equal to the difference between the actual wholesale price at which they have “bought” the demand reductions, and the 12 monthly weighted average wholesale price (which will almost certainly be lower, because demand reductions will occur when wholesale prices are higher than average)

Retailers will seek to recover the shortfall from the DRSPs’ customers or, more likely, from all their customers. To the extent that they are unable to recover the shortfall, retailers are likely to try to offload those of their customers that are paid to reduce demand.

This is a simplified description of the arrangement. The complexity of the actual data and money flows between customers, DRSPs, retailers, the energy market operator, network service providers and regulators is enough to provoke a nose-bleed from the most seasoned corporate lawyers.

By now, I am sure you are wondering why all the bother with baselines and hypothetical reductions. Why not simply pay customers for actual load reductions? The answer, in short, is that the pool of possible directly contracted customers is small.

If demand response is to be extended to thousands of customers – as this proposal seeks to do – setting baselines and hence hypothetical demand reductions, with all their unwelcome consequences, is unavoidable.

Will it work?

I am not sure. It is certainly punishingly complex. The energy market operator and regulator will have their hands full ensuring that baselines are not set at a level that prints money for DRSPs and their customers, at the expense of retailers and other electricity users. If the market operator and regulator achieve this without imposing undue cost and administrative burden, this demand-response proposal has promise.




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It will be fascinating to see whether DRSPs can indeed flush out the “latent flexibility” in a manner that is advantageous to themselves, the latently flexible, and the rest of us. Like many others, I will be watching with interest.

Update: Following publication, the AEMC clarified they intended to refer to the 12 month load-weighted average wholesale price of energy, rather than the simple average price. The article has been updated to reflect this.The Conversation

Bruce Mountain, Director, Victoria Energy Policy Centre, Victoria University

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

Australia’s still building 4 in every 5 new houses to no more than the minimum energy standard


Trivess Moore, RMIT University; Michael Ambrose, CSIRO, and Stephen Berry, University of South Australia

New housing in Australia must meet minimum energy performance requirements. We wondered how many buildings exceeded the minimum standard. What our analysis found is that four in five new houses are being built to the minimum standard and a negligible proportion to an optimal performance standard.

Before these standards were introduced the average performance of housing was found to be around 1.5 stars. The current minimum across most of Australia is six stars under the Nationwide House Energy Rating Scheme (NatHERS).

This six-star minimum falls short of what is optimal in terms of environmental, economic and social outcomes. It’s also below the minimum set by many other countries.




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There have been calls for these minimum standards to be raised. However, many policymakers and building industry stakeholders believe the market will lift performance beyond minimum standards and so there is no need to raise these.

What did the data show?

We wanted to understand what was happening in the market to see if consumers or regulation were driving the energy performance of new housing. To do this we explored the NatHERS data set of building approvals for new Class 1 housing (detached and row houses) in Australia from May 2016 (when all data sets were integrated by CSIRO and Sustainability Victoria) to December 2018.

Our analysis focuses on new housing in Victoria, South Australia, Western Australia, Tasmania and the ACT, all of which apply the minimum six-star NatHERS requirement. The other states have local variations to the standard, while New South Wales uses the BASIX index to determine the environmental impact of housing.

The chart below shows the performance for 187,320 house ratings. Almost 82% just met the minimum standard (6.0-6.4 star). Another 16% performed just above the minimum standard (6.5-6.9 star).

Only 1.5% were designed to perform at the economically optimal 7.5 stars and beyond. By this we mean a balance between the extra upfront building costs and the savings and benefits from lifetime building performance.

NatHERS star ratings across total data set for new housing approvals, May 2016–December 2018.
Author provided

The average rating is 6.2 stars across the states. This has not changed since 2016.

Average NatHERS star rating for each state, 2016-18.
Author provided

The data analysis shows that, while most housing is built to the minimum standard, the cooler temperate regions (Tasmania, ACT) have more houses above 7.0 stars compared with the warm temperate states.

NatHERS data spread by state.
Author provided

The ACT increased average performance each year from 6.5 stars in 2016 to 6.9 stars in 2018. This was not seen in any other state or territory.

The ACT is the only region with mandatory disclosure of the energy rating on sale or lease of property. The market can thus value the relative energy efficiency of buildings. Providing this otherwise invisible information may have empowered consumers to demand slightly better performance.




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We are paying for accepting a lower standard

The evidence suggests consumers are not acting rationally or making decisions to maximise their financial well-being. Rather, they just accept the minimum performance the building sector delivers.

Higher energy efficiency or even environmental sustainability in housing provides not only significant benefits to the individual but also to society. And these improvements can be delivered for little additional cost.




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The fact that these improvements aren’t being made suggests there are significant barriers to the market operating efficiently. This is despite increasing awareness among consumers and in the housing industry about the rising cost of energy.

Eight years after the introduction of the six-star NatHERS minimum requirement for new housing in Australia, the results show the market is delivering four out of five houses that just meet this requirement. With only 1.5% designed to 7.5 stars or beyond, regulation rather than the economically optimal energy rating is clearly driving the energy performance of Australian homes.

Increasing the minimum performance standard is the most effective way to improve the energy outcomes.

The next opportunity for increasing the minimum energy requirement will be 2022. Australian housing standards were already about 2.0 NatHERS stars behind comparable developed countries in 2008. If mandatory energy ratings aren’t increased, Australia will fall further behind international best practice.

If we continue to create a legacy of homes with relatively poor energy performance, making the transition to a low-energy and low-carbon economy is likely to get progressively more challenging and expensive. Recent research has calculated that a delay in increasing minimum performance requirements from 2019 to 2022 will result in an estimated A$1.1 billion (to 2050) in avoidable household energy bills. That’s an extra 3 million tonnes of greenhouse gas emissions.




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Our research confirms the policy proposition that minimum house energy regulations based on the Nationwide House Energy Rating Scheme are a powerful instrument for delivering better environmental and energy outcomes. While introducing minimum standards has significantly lifted the bottom end of the market, those standards should be reviewed regularly to ensure optimal economic and environmental outcomes.The Conversation

Trivess Moore, Lecturer, RMIT University; Michael Ambrose, Research Team Leader, CSIRO, and Stephen Berry, Research fellow, University of South Australia

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

Government gives Newstart recipients energy payment to smooth passage of legislation


Michelle Grattan, University of Canberra

The government has extended the energy payment to people on Newstart – after excluding them only days ago.

Treasurer Josh Frydenberg said the decision was made at a meeting on Tuesday night of Scott Morrison, Finance Minister Mathias Cormann and himself. He indicated it was about smoothing the passage of the measure through the parliament.

There was widespread criticism of the exclusion of Newstart recipients from the payment, which will be A$75 for a single person and $125 for a couple.




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The money is due to go out very soon and the government needed the legislation to pass immediately. While Labor had flagged it would support the one-off payment, the legislation could have been amended, because the government is in a minority in the House of Representatives.

The payment was originally set to be confined to those on the age pension, disability support pension, carers payment, parenting payment single recipients, and veterans and their dependants receiving payments.

The extension, which will also cover those on Youth Allowance and other working age payments, bringing the number of recipients to five million, will add some $80 million to the original cost of $284.4 million.

Labor seized on the backdown, seeking to suspend standing orders to move a motion in the House saying the government’s backflip “has already blown an $80 million hole in the budget”, and showed the budget was “unravelling less than 24 hours after it was delivered”.

The motion condemned the government for “only looking after the top end of town and treating vulnerable Australians as an afterthought”. The attempt to suspend standing orders failed.

Frydenberg, speaking to the National Press Club, explained the original exclusion by saying three-quarters of people on Newstart moved off it within 12 months, and 99% of people on it received another payment.




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“They get a parenting payment or they get a family tax benefit payment, whereas when you’re on the Disability Support Pension or on the aged pension, you tend to be on it for longer, and that seems to be – that is your principal form of payment”.

Frydenberg said the change “will secure the passage of the piece of legislation through the parliament”.

Appearing on the ABC Q&A on Monday, Liberal senator Arthur Sinodinos could not say why Newstart recipients had been excluded from the payment. “The short answer is I don’t know why,” he said. He also said he thought Newstart was too low.




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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.

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.

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).




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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.

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.