Winning the Energy War
First published in The Daily Telegraph, 17 August 2018
Ask people what they want from energy policy and the answer, overwhelmingly, is lower power bills. In this week’s Newspoll, 63 per cent said the government’s priority should be cutting prices, 10 per cent preventing blackouts, and just 24 per cent reducing emissions. The message is pretty clear: a government that wants to win an election (but has lost 38 successive Newspolls) must focus on price.
That’s exactly what the so-called National Energy Guarantee does NOT do. The NEG legislation seeks to turn the non-binding, aspirational emissions target agreed to at Paris into L-A-W law, backed up by $100 million fines. A “best endeavours” target that made sense three years ago, when all countries were supposed to have them and when existing policy was supposed to achieve it, makes no sense now; especially with the biggest emitters having no targets or quitting the agreement.
Given that emissions targets and unreliable wind and solar energy have helped to double power prices over the past decade, it’s very hard to see how even more renewables and even higher emissions targets could possibly lower them. The NEG says “investment certainty” will drive prices down, but how can there be any certainty when a review of emissions targets is scheduled for 2024, with Labor promising to raise them immediately should it win the election?
If John Howard’s ministers had brought a submission to the party room that had at least six MPs threatening to cross the floor and at least a dozen more expressing deep scepticism, along the lines that “this is putting lipstick on a pig”, they would have been sent straight back to the drawing board – and this is where the energy minister should go.
The government should be grateful that Victoria is still saying that the NEG is completely unacceptable and take this escape while it’s still on offer. The government could then craft a new energy policy based largely on the ACCC’s recommendations which, unlike the NEG, were all about cutting price.
First, because old coal is the cheapest power available, let’s keep the Liddell power station open by using competition law to stop anti-competitive conduct. When the Prime Minister tells AGL not to put an essential service at risk, he must mean it.
Second, let’s end all the consumer subsidies for new intermittent power – because if the barrackers are right and it’s cheapest, they don’t need subsidies anyway. This will need legislation but what better way to demonstrate that the Coalition wants lower prices, and Labor doesn’t.
Third, require retailers to offer their best price to domestic consumers and end the loyalty tax on customers, especially pensioners, who can’t shop around.
Fourth, escalate the fight with the states over their bans on gas exploration and extraction. It’s another good way to show that the government is on the side of struggling families while Labor is in the pocket of the green left.
Fifth, require all new renewable generators to provide 24/7 power. This stipulation in the scheduling rules should never have been removed during the Rudd-Gillard era government, and reliability is the only part of the NEG that’s worth preserving.
Sixth, end the legal ban on nuclear power. It’s not currently economic here but it might be soon and is the only practical way for Australia to have fully emissions-free baseload power. And it would generate another fight with Labor and the green left.
Seventh, accept the ACCC’s recommendation four for the government to underwrite new baseload power at a competitive price. Subsidising renewables to lower emissions and then having to subsidise coal to keep the lights on is hardly optimum policy but it might be necessary given the mess we’re in. A more straightforward alternative might be for a government entity to secure any gap between likely demand and available 24/7 power and to use the additional capacity to keep the market honest.
The last thing MPs want to do is fight their own side. If the PM had been as attentive to his own backbench as he is to the senate cross bench, the government would not be in its current fix. Here is a way forward that builds on things that the government has already said it supports and that avoids the showdown over the Paris targets that is otherwise looming.
It is impossible to reconcile competitive industries and low household bills with the emissions obsession that has driven energy policy for the past decade. There’s no point trying to find a consensus with Labor on this. The government should accept this contest and win it.