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 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.
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.
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.
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.
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.
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.
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 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.
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:
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.
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.
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.
Renewables are stealing the march over coal in Australia, and the international outlook is for lower coal demand. Today the international Coal Transitions project released its findings, based on global coal scenarios and detailed case studies by teams in China, India, South Africa, Australia, Poland and Germany.
Our research on Australian coal transition – based on contributions by researchers at the Australian National University and the University of Melbourne – looks into the prospects for coal use in Australia and for exports, and the experiences with local transition in the case of the Hazelwood power station closure.
Coal production in Australia is likely to be on a long term declining trajectory. Almost all coking coal (coal used for making steel) mined in Australia is exported, as is around 70% of steam coal (for electricity generation). Australia supplies about a fifth of the global steam coal trade.
A question mark hangs over the future of steam coal exports. Economic, technological and policy developments in other countries all point to likely falling coal use over time. The international coal transitions synthesis report expects that global coal consumption will go into reverse by the early 2020s.
In most industrialising countries, there are big concerns about local air pollution, and renewable power alternatives are becoming cost-competitive with coal. Add to that the pressure to meet Paris emissions targets.
China and India, on which much of the hopes of Australia’s coal export industry are pinned, mine coal themselves. When overall coal use in these countries falls, imports may be curbed, if only because of pressures to prop up domestic coal mining.
This change now reflects market economics. New wind farms and solar parks can now provide energy at much lower cost than any new fossil fuel powered generators. A new coal fired power plant would need subsidies, take a long time to build, and suffer exposure to future carbon policy.
The competition is now between renewables and existing coal fired power stations. Wind and solar power cost next to nothing to run once built, so they are dispatched first on the grid and tend to bring wholesale market prices down. In turn, the economics of coal power plants deteriorates. They will not be able to sell as much power, and get lower prices on average for every megawatt-hour of electricity produced. New wind and solar is now contracted at prices close to the operating cost of some existing coal plants, and renewables costs are falling further.
Coal plants will be less and less profitable. They will tend to be shut down earlier, typically when major repairs or overhauls are due. Major refurbishments will tend to become unattractive. And the system does not need coal plants to run reliably. A combination of regionally dispersed renewables, pumped hydro and battery storage, gas plants and demand response will do the job.
It is difficult to predict just when coal plants will shut down. The following graphic illustrates the difference between a flat 50-year retirement pattern (as used for example by the Australian Energy Market Operator), with plants retiring at 40 years of age, in line with the average retirement age of plants over the past decade, and two illustrative scenarios that capture the fact that coal plants will come under increasing economic pressure.
In our “moderate” scenario, remaining coal plants retire at 55 years in 2017 and progressively retire younger until they exit at age 30 by 2050. In our “faster” scenario, plants exit at 50 years now, then progressively younger until they exit at age 30 by 2030.
Even more rapid closure scenarios are plausible if the cost of renewables and storage continue on their recent trends. We do not present them here, instead opting for relatively conservative assumptions.
The pace of closure makes a big difference to emissions. In the “moderate” scenario, cumulative emissions from coal use are around 2.6 gigatonnes of carbon dioxide (GtCO₂) during 2020-50, and in the “faster” scenario around 1.8 GtCO₂.
As a reference point, a “2 degree compatible” emissions budget for Australia proposed by Australia’s Climate Change Authority has a total national emissions budget of around 5.8 GtCO₂ from 2020-50. Our “moderate” scenario has coal emissions take up around 44% of that cumulative emissions budget, while the “faster” scenario takes up around 32%. By comparison, coal currently makes up around 30% of Australia’s annual net emissions.
It is no longer true that reducing emissions in the electricity sector necessarily means higher prices. These days, and in the future, having policy to guide the replacement of ageing coal capacity with cheap renewables is a win-win for consumers and the environment.
We had better get ready
We better put our efforts in preparing for the transition, rather than trying to stem the tide. That includes a meaningful policy treatment of carbon emissions, and mechanisms to allow more predictable exit pathways. The relatively sudden closures of the Hazelwood power station is an example of how not to manage the transition.
Wholesale prices jumped up because the replacement investment takes time, and governments scrambled to provide support to the local community after the fact.
We can do much better. Australia is well placed for a future built on renewable energy. The change can be painful if it’s not well managed, but the future looks bright.
The most fraught day of his prime ministership has seen the implosion of one of Malcolm Turnbull’s key policy pledges – to deliver certainty on energy policy – that only weeks ago seemed on course.
As Turnbull threw everything at shoring up his leadership, business critics denounced the compromise he unveiled to appease rebellious backbenchers.
His energy policy rework placated some internal dissidents, but the capitulation has left his authority weakened and the issue itself back in confusion. Stakeholders have been left dismayed and bewildered.
After the announcement, the government was insisting the National Energy Guarantee policy was alive, as some of its backbench critics were pronouncing its demise.
Asked “is the National Energy Guarantee dead?” Treasurer Scott Morrison said on Sky, “No, not at all. It remains government policy.” He told the ABC: “The policy remains as we took it to the party room with improvements.”
But Kevin Andrews, one of Tony Abbott’s close allies, told Sky: “The reality is that the NEG, for at least the term of this parliament, is dead in the water. There is more chance of seeing a Tyrannosaurus in the local suburban street than seeing this legislation come into the parliament.”
Turnbull’s energy compromise has two parts.
First, legislation to set the 26% emissions reduction target has been shelved, on the ground that a bunch of Coalition MPs would cross the floor.
Turnbull didn’t dare to risk the hazardous route of negotiating the legislation’s passage with Labor, which might have come to nothing but an embarrassing failure, and anyway would have incited the hardliners in his ranks. And a brief flirtation with implementing the target by regulation was abandoned after that caused its own backbench backlash.
Second, a set of highly interventionist measures will be rolled out for use against recalcitrant power companies, including the possibility of breaking up those which abuse their market power.
The initiatives are based on the recent report from the Australian Competition and Consumer Commission, but even the ACCC didn’t support divestiture.
“Requiring the divestiture of privately owned assets is an extreme measure to take in any market, including the electricity market,” it said.
It is certainly an extraordinary course for a pro-market Liberal prime minister to contemplate.
Notably, the Nationals were happy – they had been pressing for the government to take this route. As former deputy prime minister Barnaby Joyce said with enthusiasm, it means “if you play up, we can break you up”.
So where is the great NEG adventure left?
Battered by political bastardy, with months of good work by Energy Minister Josh Frydenberg trashed. Without a legislated target. With less chance of an agreement with the states, which need to tick off on the mechanism. Throwing up fresh problems for investors and promising a continuation of the political climate wars.
As Innes Willox, chief executive of the Australian Industry Group put it succinctly: “Long-term investment certainty in the energy sector remains further away than ever. Despite the best efforts and goodwill of many, energy policy has again fallen victim to short-term political gamesmanship”.
And where is Turnbull’s leadership left, as backbenchers contemplate whether they would be better off under a Peter Dutton prime ministership?
No one quite knows.
Morrison told the ABC: “I spoke to Peter today in Question Time and he said his position hadn’t changed and he was fully supportive of the Prime Minster and the government’s policies.”
Just think about that. The Treasurer is asking (in question time no less) a senior cabinet colleague about his intentions.
Basically anything could happen, anytime.
On Tuesday morning, as chance has it, there is a separate Liberal party meeting, before the joint Coalition parties meeting. At the very least, it will be an interesting discussion. Whether more occurs, who knows?
On Monday night Dutton, the man on the leadership stair, was reportedly very angry after the Ten Network ran a story raising a question about his eligibility for parliament under section 44’s pecuniary interest provision.
Ten has said the story was not political leak, and the timing coincidental. But Dutton would naturally see it as a strike from the Turnbull camp.
If the next few days go quietly, Turnbull will live now from poll to poll, with enemies circling like crows over a weakened animal.
Those enemies could hardly have anticipated they would be able to do so much damage to him, in just a week, after a Coalition parties meeting that actually strongly endorsed the original NEG policy.
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They’re watching, waiting. If, or when they judge Turnbull is vulnerable – that he has lost his numbers – they are ready to strike. Now or later.
Malcolm Turnbull has announced the government will shelve any move to implement the 26% reduction in emissions because it cannot get the numbers to pass legislation in the House of Representatives.
The desperate attempt to quell the rebellion in his ranks comes as Turnbull’s leadership is under mounting pressure, with speculation about a leadership bid sooner or later from Home Affairs Minister Peter Dutton.
But Turnbull told a news conference that Dutton had been at Monday morning’s leadership meeting and “has given me his absolute support”.
“I enjoy the confidence of cabinet and of my party,” he declared.
In a package of changes to the National Energy Guarantee, Turnbull announced the government would move for extraordinarily strong measures to be available against companies that do not give consumers a fair deal, including ultimate divestment.
The government has retreated from Turnbull’s Friday compromise move of implementing the 26% reduction target by regulation. That idea, aimed at denying critics the opportunity to cross the floor, sparked a fresh backlash from Coalition MPs who thought it would make it easier for a Labor government to increase the target.
“Our policy remains to have the emissions intensity standard in the legislation,” Turnbull said at a news conference.
But “as John Howard said, politics is governed by the iron laws of arithmetic and in a House of Representatives with a one seat majority, even with strong support in the party room, if a small number of people are not prepared to vote with the government on a measure then it won’t get passed. So that’s the reality.”
He said the government would bring the target legislation forward “where and when we believe there would be sufficient support in the House of Representatives and obviously in our party room to progress this component of the scheme”.
Turnbull has been frantically seeking any means to pacify his critics, as Tony Abbott and other hardliners are determined to use the energy issue to try to bring him down.
However, it is unlikely his latest move will satisfy his most trenchant opponents. Critics such as Eric Abetz are broadening their attacks on Turnbull to call for government policy changes in other areas, including immigration.
Turnbull admitted he had not personally spoken to Labor to determine whether it would support the emissions legislation, which would give it the numbers in the House.
The shelving of the emissions legislation could cause the Labor states – yet to sign off on the National Energy Guarantee – to walk away from the broad NEG scheme.
Under the initiatives to try to drive down electricity prices announced by Turnbull, a “default market offer” would be set, from which all discounts would be calculated.
“Consumers will be able easily to compare offers from different companies and recognise when they’re being ripped off or when they’re getting a fair deal,” Turnbull said.
He said the Australian Competition and Consumer Commission estimated that for average customers on an inflated standing offer, the savings on moving to a new default market offer could range between $183 and $416 a year. For the average small to medium business the move could save between $561 and $1457.
Turnbuil said the ACCC would be given new powers to “step in where there has been abuse or misuse of market power.
“In the most egregious cases of abuse, additional powers will be conferred on government to issue directions on operations, functional separation and even, as a last resort, divestiture of parts of the big power companies,” Turnbull said.
At his news conference, where he was flanked by Treasurer Scott Morrison and Energy Minister Josh Frydenberg, Turnbull rejected a reporter’s suggestion that he had just delivered Tony Abbott’s policy. Abbott has wanted the emission target dropped and Australia to walk away from the Paris climate agreement.
“Our energy policy remains the same, but we are not going to present a bill into the House of Representatives until we believe it will be carried,” Turnbull said.
“We obviously need the support of sufficient of our colleagues to get it passed and that means, you know, substantially all of them.”
On Paris, he said: “We are parties to the Paris Agreement and the government has committed to that”.
The president of the Queensland Liberal National Party, Gary Spence, is urging MPs from Queensland – a vital state at the election – to replace Turnbull with Dutton.
Meanwhile, Western Australian Liberal senator Linda Reynolds strongly backed Turnbull, telling Sky she “absolutely” believed he would be prime minister at the election.
Former deputy prime minister Barnaby Joyce welcomed the government’s crackdown on power companies saying it was a good outcome. He was particularly pleased with the divesture power, which meant “if you play up, we can break you up”. Turnbull had shown his “capacity to listen”.
Throwing his weight behind the revised package, Joyce said “it’s a great move today.” Asked on Sky about the leadership, he said “I don’t think changing prime ministers looks good.” He also dismmissed Spence’s call for a move to Dutton saying the parliamentary wing should not be confused with the branch members.
UPDATE: Nationals enthusiastic about revisions but energy industry is critical
The Nationals have swung in strongly behind the revised package.
Deputy Prime Minister Michael McCormack and his senior ministerial colleagues held a joint news conference to back the enhanced measures to attack high prices.
Nationals who previously had been dissidents, including former prime minister Barnaby Joyce, made separate supportive comments.
The fact the backbench Nationals have been brought back into the tent is important for Turnbull, because it leaves the Liberal hardliners more isolated.
The Nationals are particularly enthusiastic about the commitment to embrace the ACCC recommendation for the government to underwrite investment in projects for new dispatchable power undertaken by new players.
Although the recommendation is technology-neutral, the Nationals see this as a pathway for new coal projects. Nationals deputy leader Bridget McKenzie said: “I’m not afraid to say the C-word: coal, coal, coal is going to be one of the areas we invest in.”
Queensland Nationals backbencher George Christensen, said: “We have a new energy policy thanks to a band of ‘Liberal National rebels’ who stood firm and fought for common sense.”
Christensen said: “What has been announced this morning puts price reductions first and foremost, so pensioners struggling to pay their power bills come before the ‘feel good’ Paris Agreement.”
Another Nationals backbencher, Andrew Gee, welcomed “plans to abandon the National Energy Guarantee”. “It shows that if you stand up and be counted you can actually make a difference, but it’s disappointing that it took this long”.
Opposition leader Bill Shorten labelled Turnbull “truly a white flag prime minister”. “Every day it is a new policy
from the government, a new policy not designed to lower energy prices but just for Mr Turnbull to keep his job from his enemies,”
“Mr Turnbull has demonstrated that he is not the leader this nation needs. Real leadership is about fighting
for the principles you believe in. Real leadership is about not always giving in to your enemies every time they disagree with you,” Shorten said.
Labor states and the ACT were scathing.
Victorian Energy Minister Lily D’Ambrosio said: “I’m not sure Malcolm Turnbull knows what the NEG is anymore – or if it still exists.”
“We’ll carefully consider whatever energy policy emerges out of the infighting going on up in Canberra.”
Queensland premier Annastacia Palaszczuk said “what we are seeing today is energy policy in free fall”.
The ACT minister for Climate Change, Shane Rattenbury said the federal government had now completely capitulated on emissions and climate change, and abandoned the Paris Climate Change commitments.
“The NEG is dead. It was hailed as a policy to address the ‘trilemma’ of prices, reliability and emissions reduction. Instead, Federal energy policy is being determined by the worst, climate change denying elements of the Liberal Party,” Rattenbury said.
The Australian Energy Council’s chief executive, Sarah McNamara, criticised the government’s announcement, saying it “has left the most critical policy, the National Energy Guarantee, in limbo.
“Re-regulation of electricity prices and aggressive market interventions are not the long-term answer to high energy prices,” she said.
“The NEG and policy stability remain the long-term solution to bringing down prices.”
McNamara said that “replacement investment demands bipartisan policy and the lack of it remains the biggest drag on the energy market.”
“This is policy with no consultation,” she said.
“Re-regulation has the very real potential to damage competition and confidence.”
McNamara said increasing the ACCC’s powers to allow divestment of private assets was not supported by the ACCC’s own report.
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The Council represents 21 major electricity and downstream natural gas businesses operating in competitive wholesale and retail energy markets. They collectively generate the overwhelming majority of electricity in Australia.
As Prime Minister Malcolm Turnbull struggles with the National Energy Guarantee, the Liberals are in an existential moment – no less dramatic because in recent history, they’ve made a habit of such moments.
Are they going to allow a toxic combination of revenge politics, anti-climate change ideology, panic over the Longman result, and sheer muddle-headedness kill the chance of giving certainty to energy investment and tear down or mortally wound their prime minister?
One pro-Turnbull backbencher describes it as a “hostage situation”, with a small number “holding the nation to ransom”. By and large, the backbench is happy with the NEG, this backbencher affirms.
Turnbull now should put his authority on the line over his energy policy, which he’s augmented by concessions and extra price measures.
This doesn’t mean asking for a vote on his leadership, but perhaps it should mean breaking the normal practice of operating by consensus and instead taking a formal vote on the policy at Tuesday’s Coalition parties’ meeting.
Yes, it would be a big risk. Some sources do say there is leadership stirring going on in Liberal ranks. (Certainly, News Corp appears to be helping fuel the situation – it’s a nice irony that a lot of trouble is coming from the government’s favourite media organisation, not the one it so dislikes, the ABC.)
It would be better for Turnbull to take on his enemies than allow his position to be eroded progressively on their timetable, which reportedly is to wait until September, after another bad Newspoll.
If he can’t hold the situation at this point, his grip is only going to get weaker quite quickly.
Turnbull, Treasurer Scott Morrison and Energy Minister Josh Frydenberg have spent the past few days cobbling together initiatives in an attempt to appease mutinous backbenchers. This comes less than a week after the NEG had majority support in the Coalition party room.
Turnbull looks weak and desperate, but had little choice because he could not afford a number of MPs crossing the floor.
The proposed changes include regulating rather than legislating the 26% target for emissions reduction in the electricity sector.
To counter his earlier warnings about a Shorten government easily increasing the target if it were set in regulation, Turnbull said in a Sunday social media video: “we will introduce a new law that ensures that before any new emissions target is set, or changed, the energy regulators and the [Australian Competition and Consumer Commission] must advise what that means for your electricity prices.
“This will ensure that any government who wants to change this, has to tell you up front what the cost will be.”
The revamped package also includes provision for a “price expectation”, with companies that don’t meet it facing penalties, plus a range of other market interventions on power companies.
“We will set a price expectation which should be the most anyone pays,” Turnbull said.
“And if the prices remain too high, we’ll implement the toughest penalties, until you’re getting value for money.
“We will not hesitate to use a big stick, as we did with gas, to make sure the big companies do the right thing by you, their customers.”
These measures will satisfy some critics within the Coalition. They don’t satisfy Abbott – and an unknown number of others.
The dissidents last week included some Nationals but the pragmatists in that party, which had its federal council in Canberra on Friday and Saturday, are anxious for a settlement (that includes a gesture to coal). Nationals cabinet ministers have been embarrassed, however, by being out of the loop as Turnbull crafted his concessions.
All that’s happened vindicates, incidentally, the Labor states and ACT declining to sign on to the NEG until after the party room finalised its position. Those jurisdictions, and federal Labor, have had one of their demands – having the target set by regulation – met, thanks to the dissidents.
After the reports of the change, Abbott was quickly on 2GB on Saturday to stir trouble.
“On Tuesday, in the party room, we were told it is absolutely essential to legislate the Paris target, because if we don’t legislate it Labor can just increase it willy-nilly, and last night it seems we’ve dumped the idea of legislation, for god knows what reason,” he said. “It’s no way to run a government, making absolute commitments on Tuesday and breaking them on Friday”.
While once again declaring he was about switching policy rather than leader, he also posed the question: “Can you change the policy without changing the leader?” Asked if there was going to be “a leadership attempt”, he said: “I don’t know”.
And that takes us straight to Peter Dutton, whose performance last week was highly provocative.
On Thursday Dutton played footsie on 2GB about his possible route out of cabinet. On Friday the Daily Telegraph said he was being asked to challenge Turnbull. On Saturday that paper’s headline was “Dutton Ready to Roll – Minister considers Turnbull challenge …”.
Dutton stayed silent all Friday. Only on Saturday morning did he tweet: “In relation to media stories today, just to make very clear, the Prime Minister has my support and I support the policies of the Government. My position hasn’t changed from my comments last Thursday.”
As they say, too little, too late. Dutton’s long silence had encouraged the speculation. His colleagues will judge (some will know) whether this was political misjudgement or disloyalty.
Turnbull is faced with a highly volatile situation. But how to handle it?
Firstly, Turnbull and his ministers need to get a package out on Monday that can be delivered (do some of the extra measures require state legislation?), is free of glitches, and provides insurgents with minimum opportunities for floor crossing. Cabinet ministers were discussing this over dinner on Sunday night.
Secondly, Senate leader Mathias Cormann, Dutton’s very good friend, should tell his mate, as they take their 5.30 am constitutional in Canberra’s cold, that allowing others to trail his coat is not appropriate behaviour for a cabinet minister.
Cormann might usefully make a couple of other points. Leaders who come to power by the sword often end badly. And if there were a leadership contest, who would know what surprise result might eventuate (who, in 2009. thought it would be Abbott who’d defeat Turnbull)?
Thirdly, Turnbull needs to get strong, articulate backbench supporters of the NEG out there countering the substance of the dissidents’ policy arguments.
And finally, he should press the party room into a decisive stand.
Chancing his arm might at worst backfire, leading quickly to his losing his head. But if so, he would have lost it before too long anyway.
Malcolm Turnbull’s situation has been worsened by the latest Fairfax Fairfax Media/Ipsos poll, published Monday, which has the Coalition trailing Labor 45-55% – a dramatic drop from a month ago when the gap was 49-51%.
This poll, which tends to be volatile, varies significantly from Newspoll earlier this month, which had the Coalition behind 49-51%.
Turnbull still has a strong lead over Bill Shorten as preferred prime minister in the Fairfax poll – 48-36%. But the gap has narrowed greatly compared with a month ago, when Turnbull led 57-30%.
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The poll showed that a majority – 54% – back the National Energy Guarantee, with only 22% against. Among Coalition voters 64% back the NEG, with support among Labor voters at 59%.
Prime Minister Malcolm Turnbull has done a backflip on his proposal to put the emission reduction target into legislation, in the face of rebel backbenchers threatening to cross the floor.
The new plan is for the energy target – a 26% reduction to carbon dioxide emissions for the electricity sector – to be set by an executive order of the minister. Such an order cannot be disallowed.
The stunning retreat emerged as the energy issue threatened to turn into a crisis for Turnbull’s leadership, and the government worked on measures to reduce power prices to meet the demands of Coalition dissidents.
Cabinet Minister Peter Dutton remained conspicuously silent on Friday in face of a report that conservatives in the Liberal party were urging him to challenge Malcolm Turnbull within weeks.
A report in Sydney’s Daily Telegraph injected leadership speculation into the centre of Turnbull’s already highly difficult battle to curb a backbench rebellion over the government’s National Energy Guarantee (NEG).
The government has consistently refused a demand from the Victorian Labor government that the target should be set by regulation not legislation.
The executive order would be accompanied by an Australian Competition and Consumer Commission report to parliament on the price impact of the target.
If Turnbull had gone ahead with legislation, and enough backbenchers had crossed the floor to defeat the bill, it would have amounted to an effective vote of no confidence in his leadership.
While some of the backbench rebels will be satisfied with the price package, it is not clear whether this will include Tony Abbott and his hardcore supporters, who want to bring Turnbull down and have smelled political blood.
Tuesday’s Coalition parties meeting will discuss the new proposals.
On another front, Nationals leader and Deputy Prime Minister Michael McCormack is facing mounting criticism of his performance, as the Nationals federal council meets in Canberra at the weekend. The energy issue is likely to be front and centre there.
Despite his public silence, it is understood that Dutton on Friday privately told Turnbull that he was comfortable with the government’s energy policy.
The backbench critics have had two major areas of concern. They did not think the NEG plan did enough to reduce electricity prices. And they were unhappy with the 26% target for reducing emissions in the electricity sector being legislated.
But the retreat from the target being enshrined in legislation will not be enough to satisfy those who want Australia to walk away from the target altogether and pull out of the Paris climate agreement.
Up to 10 backbenchers had threatened to cross the floor on the emissions reduction legislation.
The report about Dutton followed his interview with Ray Hadley on 2GB on Thursday in which Hadley challenged him over whether he was “blindly loyal” to Turnbull.
Dutton said he gave his views privately as a cabinet member and wasn’t going to bag out his colleagues or the Prime Minister publicly.
“If my position changes – that is, it gets to a point where I can’t accept what the government’s proposing or I don’t agree – then the Westminster system is very clear: you resign your commission,” he told Hadley.
The Telegraph report said Dutton was being urged to challenge Turnbull “on a policy platform of lower immigration levels and a new energy policy focusing on cheaper bills rather than lowering emissions.” Conservative MPs had told the Telegraph “a ‘torn’ Mr Dutton was considering his options,” the report said.
Asked on Nine whether Dutton was going to have a crack at the leadership, Defence Industry Minister Christopher Pyne said “absolutely not.”
Pyne also rejected the suggestion the government was on the ropes. In an obvious reference to Abbott and his supporters, Pyne said: “The polls are about 50-50 and there’s a lot of hyperventilating going on, and there’s a few people I think who are trying to put the band back together from the late 2000s, noughties.”
Finance minister Mathias Cormann said he had not heard any talk of some conservatives urging Dutton to challenge.
Cormann, a fellow conservative who is close to Dutton and said they had had four walks this week at 5.30 am, told Sky,: “We are both very committed to the success of the Turnbull Government and to winning the next election.
“We strongly support the Turnbull leadership of course and we want to see the Coalition government successfully re-elected early next year when the election is due.”
The prices package would be based on recommendations made in the recent report of the Australian Competition and Consumer Commission.
The government has been briefing that Turnbull is willing to take a “big stick” to companies to ensure consumers get better deals.
The government is looking at cracking down on how companies bid into the wholesale electricity market and secret contracts between different players.
There would be closer scrutiny of energy companies buying and selling electricity internally between their own generation and retail companies at inflated prices.
This would put the contracts of “gentailers” under attention to ensure transfer prices did not disadvantage consumers. The ACCC said high transfer prices “raise concerns about the potential for substantial profit to be allocated to the wholesale businesses.”
The ACCC has also urged more transparency on direct contracts between retailers and individual generators, proposing these be put on a public register.
Among other changes being discusssed are:
providing the Australian Energy Regulator (AER) with powers to deal with manipulation of the wholesale market.
requiring the reporting and disclosing of over-the-counter trades (in a de-identified format) to make available important market information.
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expanding the AER wholesale market monitoring functions to include monitoring, analysing and reporting on the contract market.
Malcolm Turnbull had a party-room victory but a god-awful week, and it wasn’t because his approval plunged in Monday’s Newspoll. His energy policy is back in the mire, and Tony Abbott is being – as one colleague neatly describes it – the agent of chaos.
It’s nearly unimaginable how the Coalition chooses to replay that old self-destructive record. In Bill Shorten’s office they’ve been digging out the 2009 headlines, such as “Battered Turnbull faces mutiny” and “Abbott leaves leader in crisis”.
Well, Turnbull is not “in crisis” but things are quite a serious mess, as those who hate him, plus others who don’t, sharpen their attack in another round of the climate wars.
In Tuesday’s Coalition parties meeting, where Turnbull won strong support for his energy policy, several reserved their right to cross the floor on the emissions reduction legislation, and later more said they might do so. There was talk of up to ten.
Assistant minister Keith Pitt, from the Nationals, let rumours run that he might stand down from the frontbench to oppose the legislation (a cynical Nationals source said: “he’s made hollow threats before”).
Resources Minister Matt Canavan (also a National), asked in the Senate whether he’d attempted to persuade Pitt on the National Energy Guarantee, said he’d “tried to persuade all I’ve spoken to about the common sense of adopting” the NEG.
The Nationals’ federal council meets this weekend in Canberra, where there will be a lot of chatter about the NEG. Deputy Prime Minister Michael McCormack in his council address will emphasise the vital importance of lowering power prices – very safe ground – but given his divided ranks, he isn’t expected to come out with a passionate advocacy of the technology-neutral NEG. A motion on the council’s agenda calls on the government “to support the building of high-energy, low-emissions, coal-fired power stations”.
It’s one thing for backbenchers to talk about crossing the floor, quite another to do it. Turnbull is working hard on the rebels – though obviously not on Abbott – to try to bring them around.
They have wish lists, and Turnbull, the ultimate transactional politician, is seeking doable ways to mollify them. The government has already indicated it will accept the Australian Competition and Consumer Commission’s recommendation to underwrite new dispatchable power projects.
On Thursday night a senior source said Turnbull was considering “heavy-handed intervention” to bring down prices. “The prime minister is not afraid to pull out the big stick on electricity companies if that’s what it takes,” the source said.
The stakes are clear. If everything went pear-shaped and there were enough floor-crossers in the House of Representatives to sink the package’s emissions reduction legislation, that would effectively (though not literally) amount to a vote of no confidence in the prime minister.
Hard to imagine, and probably only Abbott is thinking that far ahead. When other dissidents contemplate what could happen, some can be expected to fold on that ground alone.
Meantime, things fray as pressure mounts.
Take Peter Dutton’s Thursday interview with 2GB’s Ray Hadley. Hadley challenged Dutton over the energy policy, demanding to know, “Are you blindly loyal [to Turnbull]?” Instead of mounting a full-throttle defence of the policy, Dutton said he gave frank advice in private as a member of the cabinet and didn’t bag out colleagues or the prime minister publicly. This just left a question mark over what Dutton actually thinks about the policy.
Turnbull is up against multiple obstacles, apart from the insurgents.
He needs to get the states and the ACT onboard for the NEG, but the Victorian Labor government has a particular interest in procrastinating, and may do so until it goes into caretaker mode in October. It is judging what’s best for itself electorally, especially given its battle with the Greens in Melbourne’s inner metropolitan electorates.
Impatient as the federal government is to get finality on the NEG, it could be risky for it to press the Victorians too hard before the November state election. That might just increase the chances of a firm “no”. As one federal source says, Victoria needs to be accorded some space.
After the state election, things would be easier. If the government changed in Victoria, the new administration would sign up. If Labor was returned – and had left open its position on the NEG during the campaign – it might be more readily persuaded to fall into line.
Then there is federal Labor. It is generally thought the government will need ALP support to pass the emissions reduction legislation in the Senate, and defections could mean Labor was needed in the lower house too.
The argument has gone: Labor would try to amend the emissions reduction target in the legislation but, assuming that failed, it could then pass the legislation in order to take the climate/energy issue off the 2019 election agenda. That would leave a Shorten government able to increase the target later.
If Labor sees Turnbull being wounded by the internal battle, however, it would have every incentive to hold out on the emissions legislation, leaving the prime minister unable to deliver it.
Another set of players in Turnbull’s energy problems comprise the media shouters: Alan Jones, Hadley, Peta Credlin, Andrew Bolt.
They direct their megaphones to the so-called Coalition “base” and their messages resonate particularly with the Liberal National Party’s grass roots in Queensland. This makes some backbenchers nervous, inclining them (in one description) to “virtue signal” to the base.
Coalition backbenchers generally, increasingly frightened for their seats, are caught in a swirl of pressures and emotions. Some are angry at Abbott. Some look for an unrealistic nirvana, where prices suddenly plunge in time for the election.
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Some just want the NEG out of the way, a policy in the kit bag, whatever they think of it. NSW Liberal senator Jim Molan, who describes the NEG as “sub-optimal” told Sky he supported the package on the basis that “we’ve got to focus on getting re-elected”, noting: “I’ve spent all my life making rubbish policy work.” An endorsement of sorts.
On the face of it, the National Energy Guarantee (NEG), adopted as Coalition policy at a party room meeting yesterday, appears to promise the certainty that industry, consumers and experts have desperately sought for the past decade. But beware: there is a renewable energy train coming down the track that is unstoppable.
The NEG cannot stop the train, but it could act as a guide rail to steer it – or even safely accelerate it – by reducing investment risk and lowering the cost of finance for renewable energy projects.
The latest figures indicate that the renewable energy train will smash Australia’s 2020 Renewable Energy Target. Assuming that the current pace of renewable energy investment continues (and there is good reason to expect that it will, given the unarguable economics of plummeting renewable energy prices worldwide), then the electricity sector would be on track to hit the government’s 26% emissions reduction target by 2030 with virtually no policy help at all.
The unstoppable renewable energy train may even end up contributing the lion’s share of the reductions needed to achieve Australia’s economy-wide target of cutting emissions by 26-28% relative to 2005 levels by 2030.
This would particularly be the case if we ramped up the electrification of other sectors such as transport and industry, and encouraged householders to replace gas with electricity for heating and cooking.
The big issue then would be whether the rest of the electricity system can adapt quickly enough as renewable energy reaches 50% and above. This would call for significant grid upgrades and storage systems, so as to provide efficient and reliable supply.
Missing the train?
With the NEG projected to deliver no more than 36% renewable energy by 2030, one could argue that this policy is simply waving from the platform as the renewables train goes whooshing by. But this argument ignores the impetus that the NEG would provide to advancing climate policy as a whole.
The NEG is widely regarded by energy analysts as the fourth-best solution – after a carbon pricing system, an emissions intensity scheme, or a clean energy target. But while many commentators have taken issue with both its ambition and its effectiveness, legislating the NEG would undeniably break the policy paralysis that has stopped Australia from moving forward for so many years.
There is no reason why a future government could not introduce other measures – such as an economy-wide price on carbon, regarded by most economists as the most efficient way to combat climate change. Such a scheme could be laid right over the top of the NEG and would drive further transformation not just of the electricity market, but every other sector of the economy. This would be complementary to the NEG and could help decarbonise the electricity sector even more rapidly.
Yet much of the opposition to the policy has come from government backbenchers concerned that it already puts too much emphasis on cutting emissions. How, then, can the NEG thread the political needle without being compromised as an effective tool for decarbonisation?
Making the NEG better
First, the mechanism itself needs to be decoupled from the ambition. That is, the politically charged emissions reduction target needs to be set not in legislation but by regulation, so that it can easily be used as a dial to tune the level of ambition.
Any future government could then ramp up the electricity sector’s emissions target beyond 26%. This could be done either to cover the inevitable shortfall in other sectors (where emissions reductions are harder to achieve), or to help deliver a steeper emissions-reduction trajectory if required by the world’s post-Paris progress. Bear in mind that signatories to the Paris Agreement have agreed to periodically review and tighten their emissions goals, meaning that Australia’s current target will probably be revised upwards.
Critics of this approach might argue that it provides less certainty to industry, rather than more. But the certainty would be established by the mechanism of emissions reductions rather than the rate. If that sounds hard to envisage, consider how financial institutions plan and prepare for changes to interest rates, within a broad economic regulatory framework.
A timetable for reviewing and adjusting emissions targets could be set in much the same way as the Reserve Bank of Australia handles interest rates, although this should perhaps be done on timeframes measured in years rather than months.
Second, the states need to be able to set their own renewable energy targets, independently of those states that currently have no target, such as New South Wales. One way to implement this would be for all states to agree to each comply with the minimum 26% target so there would be no free-riding on the back of those states that decide to be more ambitious than the national baseline.
Whatever happens, the renewable energy train is building momentum, and the debates within COAG and with intransigent elements in the federal Coalition party room may end up being irrelevant in the long run.
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But for the sake of our future, the resolution of climate and energy policy via the NEG will be an important baby step that helps to underpin the cost of decarbonising our entire economy. To do that, we must first pick the lowest-hanging fruit: the electricity sector.