The Australian Government released its green paper on energy policy today, but you could be excused for thinking it'd just done a great big copy and paste from the prior Labor government’s 2012 Energy White Paper, or even the Howard government’s 2004 White Paper. In fact there’s even a number of recommendations that hark back to the 2002 Energy Market Review headed up by Warwick Parer and assisted by Rod Sims (now ACCC boss).
For those that follow the energy market and energy policy closely, there is little to find in the Green Paper that will surprise and isn’t already in train via a range of existing processes. That’s not to say this is a bad thing, but one wonders what’s achieved by these lengthy and elaborate processes to summarise existing policy initiatives.
Here’s the recommendations in short.
Silent on changes to the Renewable Energy Target
While the Green Paper states a desire of the government to “rationalise emission reduction actions to reduce unnecessary costs”, it doesn’t actually explicitly explain what policies it wants to rationalise. This is probably because most programs have already been axed by either the federal or state governments with little left to control Australia’s emissions. The one major measure left is the RET. On that particular measure the government simply says it will “consider the findings” of the Warburton Review while not expressing a view on that review's recommendation to shut the scheme down. However, Climate Spectator has been informed that Minister Macfarlane has now formerly approached Labor’s shadow environment minister, Mark Butler, seeking to initiate discussions on possible changes to the scheme.
Privatise the remaining electricity assets currently in public ownership
This is already in train. NSW is already partway through privatising its generators. Queensland plans on selling its generators as well. Plus, they and NSW government have announced they’ll be taking a policy to their next respective elections of leasing their network business for 99 years – that means privatisation. In addition, the West Australian Government is also known to be seriously considering privatisation, too. WA Treasurer and Energy Minister Mike Nahan also wants to privatise their generator-retailer business, Synergy.
The big assets still outstanding are Snowy Hydro and Hydro Tasmania. Notably both are expanding heavily into power retailing, with Snowy Hydro recently acquiring one of the larger second tier retailers – Lumo Energy.
Change pricing of electricity to one based on peak demand, not average kilowatt-hours
Again, this is already in train via a process being run by the Australian Energy Market Commission. The intention is that poles and wire businesses will move away from recovering their costs based on overall kilowatt-hours of electricity transported over their network no matter whether these a consumed when the network is or isn’t constrained. Instead, network costs will be charged to power retailers based on their customers’ draw on network capacity during peak demand periods (afternoons on hot days).
The devil will be in the detail of such reform. Such recommendations go all the way back to the 2002 Parer Review, yet precious little has happened – even with the mass roll-out of smart meters in Victoria. The one worry is that this is used as a Trojan horse for penalising the use of solar panels while doing precious little else to encourage more efficient use of electricity network capacity.
Also, the Green Paper says very little about the most glaring distortion in the Australian electricity market: the cross subsidisation of rural electricity users by urban users. This has acted to substantially hinder the use of distributed energy solutions such as solar with batteries that are now becoming a cheaper option for meeting the power needs of rural consumers, serviced by heavily subsidised electricity wire infrastructure. The Green Paper instead proposes providing an utterly token $10.6m Outback Power measure for remote indigenous communities. This would be lucky to address more than a handful of communities meanwhile the government is seeking to abolish a similar but more adequately resourced program being run by the Australian Renewable Energy Agency.
Likes energy efficiency but doesn’t want to do anything
The Green Paper speaks glowingly about the benefits from improved energy efficiency (it labels it “energy productivity” lest it might be associated with persona non grata: global warming) but proposes precious little to encourage it. The best that could be said is that the Green Paper at least suggests that the program which applies minimum energy efficiency standards for energy consuming equipment should continue rather than be abolished.
'Hands-off' is the watchword.
The federal government has yet again ruled out reserving a proportion of gas for domestic use in spite of vigorous complaints from large industrial gas consumers suffering major price hikes or difficulty obtaining long-term contracts.
In addition it continues to urge state governments, particularly NSW to relax the restrictions it applies to extraction of coal seam gas and restates its plans to expedite environmental approvals via a ‘one-stop shop’ run by state governments.
The one thing it thinks might be worthy of government intervention is improving the transparency of the gas market and level of competition. It is suggesting that it would like to conduct an inquiry either through the ACCC or the Productivity Commission into levels of competition but stops short of committing to conducting such a review.
Reducing carbon emissions
But isn’t this plant food? The elephant in the room is mentioned largely in passing.
At most the government tries to take credit for the billion dollars which has already been spent by the Australian Renewable Energy Agency trying to suggest the government is an active supporter of R&D into renewable energy while it, at the same time, has a bill in parliament proposing to abolish the agency and its remaining $2 billion in funding.
Apparently this will all be solved by the government’s Emission Reduction Fund. Meanwhile we’re going to be an energy superpower, so stop trying to spoil the party.
CORRECTION: An earlier published version of this article stated that Mike Nahan was the former Western Australian Energy Minister. This is incorrect as Mr Nahan continues to hold the energy portfolio in addition to taking on the Treasury portfolio.