Calm down and power on
The advice from Energy Security Board chair Kerry Schott on day two of The Australian Financial Review’s Energy and Climate Summit was for everyone to calm down and get on with it. As Dr Schott and others told our Summit, the transformation of Australia’s electricity system is accelerating and unstoppable. The challenge is to update the National Electricity Market’s complex rules to retain the benefits of a functioning national energy market – with clear and consistent investment signals – amid political pressure to return to more heavy-handed state-based regimes.
The Summit began with federal Energy Minister Angus Taylor at odds with NSW Energy Minister and fellow Liberal Matt Kean over the just-released NSW energy plan that would leave regulators directing a lot of wind, solar, batteries and hydro – but perhaps not much gas – into the state’s grid. But that tension was diverted into Mr Kean’s attack on big energy gentailers such as AGL for holding back investment in order to profit from their remaining coal-fired generators. The issue here is whether politicians can handle the market price signals needed to encourage big and lumpy capital investments in “firm” power as the nation’s fleet of coal-fired power stations reach the end of their natural lives. So, it’s not surprising that the big energy companies have responded to a new regulatory “roadmap” from NSW by pausing to consider whether their proposed investment in gas-fired firming generation still makes commercial sense. As Emma Herd of the Investor Group on Climate Change told day two of our Summit, the debate is still captured by “combative and jumbled up policy discussions”.
While Australia’s overall energy and climate debate is converging, it remains both politically-charged and highly technical. By the end of our Summit, the question was whether a revised National Electricity Market can be integrated with the hardening state-based regimes of NSW, Victoria, Queensland and South Australia. As outgoing Australian Energy Market Operator chief Audrey Zibelman said: “What we can’t afford … is to not make a decision and continue to whinge to each other about not making a decision”.