First published in The Sydney Morning Herald, 8 December 2018

The Liberal Party is convinced that free markets are by far the best way to generate wealth and thinks that allowing people to do what’s in their best commercial interests will usually maximise society’s economic well-being. But that doesn’t mean “anything goes”.

The party has never believed in unfettered markets, any more than it’s ever believed that the ordinary law of the land is redundant. No sensible government should allow market forces to deprive its citizens of an essential service or allow a market oligopoly to profiteer at people’s expense.

Weirdly, it’s now the Labor Party that is defending the ability of companies like AGL to rip people off. The government’s “big stick” legislation – which Labor is against – is designed to stop power companies failing to pass on price reductions or manipulate the market for their own gain.

As a last resort, on the ACCC’s recommendation and after a decision of the Federal Court, the government supports the break-up of businesses that consistently exploit their market power. Similar divestiture powers have long existed in the United States and the United Kingdom, which are hardly bastions of socialism.

I’m looking forward to the “big stick” being waved at AGL, which has announced the closure of the Liddell coal-fired power station in three years’ time, despite the likelihood of blackouts or power rationing across much of NSW (because Liddell is 10 per cent of total supply). Liddell should be sold to a company, such as Alinta, that is prepared to keep it open until new reliable power generation is guaranteed.

It’s disappointing that the legislation was the victim of Labor’s political game playing this week and hard-pressed consumers must now wait until February for Parliament to consider it.

As the ACCC reported earlier this year, there is an “unacceptable and unsustainable” level of market concentration and market manipulation in the power sector. Last year, for instance, the French-government part-owned multi-national Engie shut the giant Hazelwood power station at short notice in order to increase wholesale power prices (which almost doubled), drive up its profits and increase the value of its other coal-fired power stations. This is a classic case of a business putting its commercial interest ahead of the national interest.

The Liberal Party’s energy policy is to get prices down while keeping the lights on. We don’t need to worry about emissions reduction because previous policies mean the energy sector will achieve the 26 per cent emissions-reduction target “in a canter”, as the Prime Minister has said. Labor’s policy, by contrast, means higher prices and more blackouts because almost doubling the emissions-reduction target to 45 per cent and almost doubling the renewable energy target to 50 per cent would mean the swift closure of existing coal-fired power stations which provide the power that is both the cheapest and the most reliable.

Particularly under the current government, the Liberal Party has always aspired to be the party of lower power prices. While household power bills have doubled in real terms over the past decade, largely due to misguided green rules put in place by the Rudd-Gillard government, the Abbott government’s abolition of the carbon tax saw an immediate power price fall of 10 per cent. The Turnbull government’s measures to secure domestic gas supplies have seen a 20 per cent reduction in wholesale prices over the past year. And the Morrison government’s measure to end the “loyalty tax” on customers who don’t demand discounts will see many households’ bills fall by 15 per cent in the New Year.

The Morrison government’s energy policy is a big improvement on the so-called National Energy Guarantee because that policy sought to get the lowest prices and the most reliable supply consistent with achieving a given amount of emissions reduction. Emissions reduction was its key element. The other elements of the NEG would be scaled up or down depending on the emissions target adopted by government – which is why it’s now been adopted by Labor, as it could readily have been adjusted from the government’s 26 to Labor’s 45 per cent target.

There are many claims that renewable wind and solar power are now the cheapest available. These are hard to take seriously because the people making them invariably want the existing consumer subsidies to be continued and even increased. But even if wind and solar power are the cheapest when they are operating, what happens when the wind doesn’t blow and the sun doesn’t shine? Cheap power is not much good if you never know when the lights will work.

To keep the lights on, unreliable renewable power always needs back-up that can come into the system at a moment’s notice. The combination of wind and solar farms to supply power when they can, with gas turbines to supply power when they can’t, is vastly more expensive than existing coal-fired power generation and considerably more expensive than new coal-fired power, as demonstrated by the glut of new coal-fired power stations being built in countries without emissions restrictions.

Countries such as China, India and Indonesia, which are desperately trying to lift their people out of poverty, would not be building new coal-fired power stations on a massive scale if there really were a cheaper alternative. It’s this greater global demand that is driving Australia’s thermal coal exports to record levels. Incidentally, these new, so-called high-efficiency-low-emissions coal plants produce 30 per cent lower emissions than most of Australia’s existing plants.

Along with clobbering power companies that hurt consumers, the government is in the process of underwriting investment in new reliable power to keep heavy industries competitive. It doesn’t have to be coal – but it probably will be.