Grappling with the big picture on energy

The RET is far from the only factor in determining Australia's future energy supply.

The current obsession with the renewable energy target is both understandable (lots of vested interest here) and a bit irritating. It is far from being the only factor of importance in energy supply.

This week’s Energy Markets Outlook conference, which I am co-chairing with Robert Pritchard of the Energy Policy Institute, offers an opportunity to look beyond what we can immediately see towards the big picture in 2030. That covers not only the lifetime of many infrastructure assets now at work but also the perspective of many investors.

My journey through this energy landscape covers a timeline starting with dominant, government-owned utilities, a multitude of municipal suppliers, a vigorous (and occasionally vicious) rivalry between electricity and gas providers and a generation environment where coal was wholly dominant and the next horse in the power race was hydro. 

This was an environment where, along with death and taxes, the one national certainty was that we always needed more electricity. Greenhouse gas emissions were still far away from becoming a rowdy issue of public debate affecting the careers of politicians.

Today we have an energy (electricity plus gas) environment where, on the east coast, three big shareholder-owned 'gentailers' dominate the scene. Power demand is on a slippery slope, emissions demand the attention of world leaders and corporate chief executives alike, outdated coal plants are under a marketplace siege and the export of eastern Australian gas has thrown a huge rock at both the energy market and the political debate.

During my sojourn in the energy space, we have had three major attempts (1988, 2004 and 2012) at producing a national strategy and are embroiled in another at present (which the Abbott government tells us will be delivered within months). However, certainty for investors in electricity and domestic gas remains a mirage; energy prices are reaching levels beyond the worst imaginings of consumers in the 1980s.

Not surprisingly, the program for the three-day conference, the third of its ilk I have helped to run since 2012, covers a wide canvas.

I rabbit on a lot in what I write about the need for context in the energy debate and this week’s agenda, I hope, is going to provide context in spades, including flying in Donna Nelson, the chair of the Public Utilities Commission of Texas, to talk to attendees about lessons for our east coast electricity market to be drawn from the American experience.

There is just one politician taking part, Queensland’s Mark McArdle, who has recently completed the task of drawing up a 30-year electricity plan for his state -- something Victoria and New South Wales should prioritise for both power and gas.

Part of my ‘look beyond what you see’ shtick is to argue that investment on energy supply for the east coast, which is 90 per cent of the national market, is not just about how many wind farms we could and should have.

It is about how many out-of-date coal plants we need to shed and how to do it without damaging supply security. It’s about the potential for solar to become a genuinely big deal across factory and other business rooftops, our national inability to prioritise energy efficiency, how we can simultaneously meet the needs of consumers (not just householders) and shareholders, and how we can have an equitable cost-sharing set-up in a political snakepit.

It is about what sort of delivery network we need and can build and who pays for what, and whether there should be any role at all for government in the ownership of power supply.

It is also about getting a decent handle on east coast gas supply, which is threatening to blow up on policymakers, suppliers and consumers -- especially in New South Wales -- in the near 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.