Government needs to get its energy act together

Last week’s conference in Sydney on eastern Australia’s energy market outlook provided a sounding board for many current contending views and reinforced, at least for me, three key elements to underpin a better environment for investors and consumers.

My conference co-chair, lawyer Robert Pritchard, director of the Energy Policy Institute, said: “We need sound policy, delivering flexible, innovative, affordable solutions for the long term, not more prescriptions handed down from on high. To help work towards this, we need the energy green paper (now four months late) as soon as possible.”

The second element is that resolving the current mess is not just an issue for the federal government. The states (and the ACT) need to be part of clearing today’s weed-strewn energy field and re-sewing it to enable an enduring harvest.

Interestingly, one of the responsible policymakers, Queensland Energy Minister Mark McArdle, was among the conference speakers most vehement about the need for the Council of Australian Governments to get real about policy solutions.

The present CoAG arrangements are “stagnant,” he said, “bogged down in bureaucracy, not getting near tackling the tough questions and the real issues.”

Origin Energy chief executive Frank Calabria added that the existing east coast policy settings aren’t providing the balance suppliers need.

The current environment of subsidies and cross-subsidies is “not viable,” he said. “We need good governance, flexibility and transparency -- and better ways to deliver carbon abatement.”

The third element was raised again and again. Consumers need a lot less confusion in the marketplace, they need to be better informed and they need the tools (technology and better tariffs) to enable them to feel secure about making usage choices and about ways to cut their costs.

Australian Energy Market Commission chairman John Pierce said: “We want to get to a place where consumers are as comfortable making decisions about energy as they are in (buying) other products and services where competition and choice is taken for granted.”

Pierce also delivered a thrust aimed at those arguing for the replacement of the east coast wholesale power generation structure with a capacity market but capable of being applied more broadly.

“If you require an omnipresent, all-knowing being -- let’s call him or her ‘god’ -- to have perfect powers of prediction, the only thing you can perfectly predict is that ‘god’ will be wrong and that consumers will pay (for the mistakes).”

The core point, he said, is that is legitimate for governments to have a range of policy objectives but they have to be careful that they do not legislate for one to the cost of another.

Which, of course, is exactly what a succession of governments (federal and state) have succeeded in doing in pursuing energy security, supply reliability and environmental goals.

Energy Supply Association chief executive officer Matthew Warren challenged policymakers to answer the question: “What do we want from the electricity market under 21st century conditions that we are not getting now?”

Reliability, he argued, is a precondition. The market must be “investible” above all else.

It must also be “efficient” and “elastic” and able to optimise the introduction of new technology in pursuit of a low-carbon transformation.

Considering what he and I and the other 200 participants heard and said, Pritchard made an interesting summary point. While we really need the energy green paper ASAP, he argued, it is not the same with the white paper.

“I would give all the stakeholders a break until the new year to think through Australia’s vision (for its role) as a supplier of energy to the Asian region as well as to domestic consumers,” he said.

The final product, he added, needs to be a long-term commitment, involving a bipartisan federal approach, as well as a much higher level of collaboration between Canberra and the states.

All of which, I think, gets us to the point where the challenge is not to rush through some half-arsed approach to the renewable energy target, but to make it an element in an effective integration of energy and environmental policy.

“Robust policy positions,” Pierce told the conference, ”cannot be predicated on one particular view of the future.”

Keith Orchison, director of consultancy Coolibah Pty Ltd, publisher of the This is Power blog and editor of OnPower newsletter, was chief executive of two national energy associations from 1980 to 2003. He was made a member of the Order of Australia in 2004 for services to the energy industry.