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Australia's tortured energy debate: what's the state of play? | Australia news



There are lots of moving parts in Australia's tortured energy debate – and many of the parts are moving in the wrong direction. With parliament set to resume next week, and with energy back on the agenda, it is timely to recap the state of play.

Where is the energy policy up to?

Australia's energy policy has been in flux since the Coalition dumped its national energy guarantee (Neg) when it ditched Malcolm Turnbull as prime minister. At the time the conservatives moved against Turnbull, the Neg was derided by internal critics as bad policy and "merchant bankers' gobbledigook". But now, a year after the turmoil, Energy Minister Angus Taylor says we need not worry about, or mourn, the abandoned Neg mechanism because all (unobjectionable) core objectives will be achieved even though it was never legislated. (because it was terrible). This opening summary of the state of play sets sets the tone for the whole debate. You don't laugh if it's so serious.

Coalition energy



'A year after the turmoil, Energy Minister Angus Taylor says we need not worry about, or mourn, the abandoned Neg mechanism.' Photograph: Mike Bowers / The Guardian

What has replaced the Neg?

Instead of the Neg, which was a mechanism to ensure the reliability of supply and emissions reductions in the electricity sector, Taylor has proposed underwriting a new power generation government to boost supply. This more ad hoc proposal has been criticized by a number of stakeholders – Kerry Schott, chair of the Energy Security Board, said very politically this week it would not encourage "the huge new investment and innovation that is needed". The program also seems to be moving slowly – though Taylor insists on "advanced negotiation" with some of the favorite projects.

In addition to underwriting, Taylor is also privately speaking to state governments, most notably New South Wales, to work out what to do post-Neg. The Berejiklian government wants Taylor just to revive the Neg, given almost every stakeholder in the energy sector would prefer a transparent national policy mechanism than governments picking winners. But Taylor has said no. NSW has now put a Plan B to Taylor, which includes Canberra assisting a transition to lower emissions by underwriting generation, possibly fired renewables, to replace the Liddell power station, as well as underwriting and de-risking new transmission investments that have been highlighted as urgent by the Australian Energy Market Operator (Aemo). That plan remains under discussion.

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Where is the 'big stick up' to?

Now we arrive at the big stick. This proposal creates power for the government to break up energy companies if they engage in price gouging. This idea emerged during the frenzy of colleagues moving Turnbull out of his job and dumping the Neg and Turnbull trying, frantically, to stay in his job. The Nationals love this proposal. Liberals have always been uncomfortable about it, and backbenchers have succeeded in getting the original idea amended.

The energy sector, unsurprisingly, hates it. The Australian Energy Council says the current version of the post legislation remains a sloppily drafted shocker that will deliver exactly the opposite of what its authors intended. Energy retailers argue what the market needs right now is to ensure that we get the right investment in the grid to keep the lights on, and emissions coming down – and that you are creating certainty by threatening to break up private companies. While the Australian Business Council recognizes that the government has a mandate to implement the big stick, it supports policies to drive down electricity prices: “This will not be achieved by extreme intervention in the electricity market which brings new risks, unintended consequences. and has never worked before ”.

Is the criticism fair?

Rather than take the industry's word for it, or the government's, let's look for an independent voice – the ACCC. The watchdog competition took a good look at why power prices are so high, and pointed to a number of contributing factors, not just energy companies behaving badly. Energy companies were certainly bamboozling customers with “discounts” that may or may not be discounts, and the ACCC said there was not enough competition in the generation market. The ACCC chair Rod Sims suggested this week companies could delay investing in new generation to protect their profits. But there were other factors at play too: government-owned networks needed to write down the value of their assets; some of the state-based renewable energy subsidies were too generic; and there was prolonged policy uncertainty because of the decades-long partisan war in Canberra. The ACCC said lots of things needed to change. It doesn't recommend breaking up energy companies. In fact it explicitly cautioned against doing: "The ACCC does not believe it would be appropriate to intervene in the way in which the market has evolved across the national electricity market."

Liddell power station



'NSW has plan B involving Canberra underwriting generation, possibly fired renewables, to replace Liddell power station.' Photograph: Jonny Weeks / The Guardian

If that's terrible, parliament will reject the big stick – right?

On current indications, the big stick seems more likely to pass than not. We need to work through this step by step. In the last parliament, Labor opposed the bill. That sent the government searching for crossbench support. The Center Alliance bloc telegraphed it would amend the bill to apply the proposed divestiture power right across the economy – not just the energy sector. Most possible Nationals would support these changes because the Nats have always wanted an economy-wide divestiture power to go after the supermarket chains. But Liberals would (how can I put this politically?) Go nuts if an economy-wide power divestiture cleared the Senate. Sensitivities are such that during a recent meeting of the backbench committee, ministers agreed to bring the proposal back for backbench approval if it was amended in the Senate.

But Labor is now engaged in a post-election rethink. No final decision has been taken, the putative shift has yet to be cast into the shadow cabinet or caucus, and internal views are mixed – but there is an inclination to pass legislation if the opposition can secure use or assurances, including no backdoor privatization of electricity. assets in various states. If the government can work with Labor's support, if it can change the opposition's proposals, this will avoid any internal meltdown between the Liberals and Nationals over an economy-wide divestiture power.


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