State politicians blind to ramifications of energy crisis
WHEN it comes to energy, and in particular the gas shortage, state politicians seem to be on a different planet, writes David Speers.
Opinion
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SOMETIMES you have to wonder about the antenna of state politicians. Australia is in the grip of an energy crisis. Power bills have gone through the roof and businesses are hitting the wall. Worse still, regulators this week warned of an extraordinary gas shortfall on the east coast next year.
There’s plenty of blame to go around, but somehow our state leaders shirk responsibility. They appear on factory floors and talk about jobs as if power prices have nothing to do with them.
For years they have been gripped by fear on coal-seam gas, terrified of political pressure from green groups, some farmers and broadcaster Alan Jones. Siding against CSG has been a safe bet, but the political ground is shifting.
This week’s reports from the Australian Energy Market Operator and the Australian Competition and Consumer Commission should be a wake-up call. The east coast is facing a severe gas shortfall. The biggest reason for this shortfall is not increasing exports, it’s increasing demand at home. As old coal-fired plants close, energy companies need gas. With all the focus on AGL’s plan to close its Liddell coal-fired power station, few have paid attention to the fact it intends to replace it with gas. Sure, there will be renewables in the mix, but gas will provide the baseload supply when demand peaks.
Manufacturers need gas too. Glass makers, smelters, plastics and chemical plants rely on affordable gas and can’t access it. This is squarely an area of state responsibility.
Geoscience Australia reckons Victoria is sitting on 27 trillion cubic feet of gas, enough to supply the entire east coast market for 40 years. Yet the Andrews Labor Government has an outright ban on “unconventional” (coal seam) gas exploration. This blanket approach has bipartisan support from the Liberal/National opposition. Victoria has a moratorium on “conventional” gas development to boot.
NSW technically doesn’t have an outright ban, but the green tape and other restrictions in place have the same effect. Santos has spent a decade and $1 billion trying to develop a big gas project at Narrabri that would meet supply half the state’s needs. While this regulatory nightmare drags, NSW imports 95 per cent of its gas.
NSW Premier Gladys Berejiklian says the policy won’t change. She’s under no pressure from the state Labor Opposition either. Acting leader Michael Daley this week even suggested “there is no gas shortage on the east coast of Australia”. What planet is this guy on?
The ACCC says gas prices would be 25 per cent lower in NSW and Victoria if they dropped these restrictions. The Prime Minister is now telling households and businesses in those states to blame their state governments. The Turnbull strategy is to make that blame stick.
On Wednesday Malcolm Turnbull had a win. He convinced the major LNG exporters to make enough gas available in the east coast market to meet the predicted shortfall for the next two years. It’s not a permanent solution, but a start. Turnbull didn’t need to “pull the trigger” on export controls — the threat of the trigger worked.
Labor was left looking slightly ridiculous. It was demanding Turnbull pull the trigger before the scale of the gas shortfall was actually identified. It still wants the trigger pulled now, even after the gas companies have acted.
And when it comes to the states, federal Labor isn’t muscling up. Earlier in the year, Bill Shorten said the states “are producing enough gas”. He now agrees they “do need to do more”. His frontbench, meanwhile, is torn over whether coal-seam gas is a good thing or a bad thing.
Of course, protecting the environment is important. But let’s consider the view of Chief Scientist Alan Finkel on CSG. “It’s being used widely across America,” Finkel says. “The evidence is that, if properly regulated, it’s completely safe.”
So if the states won’t listen to the Prime Minister, the Chief Scientist, the ACCC, struggling manufacturers or battling households, what will change their minds?
On Thursday the Commonwealth Grants Commission flagged a change to how it doles out GST revenue to the states. In an interim position paper, the Commission made clear it does not want to “unduly penalise or reward states which, in similar circumstances, adopt very different policies towards potential mineral and energy developments (for example, coal-seam gas developments)”.
In other words, why should a state that’s exploited its resources, like WA, be penalised, while others that refuse to do so are rewarded? The warning is significant.
If NSW and Victoria start to lose GST revenue because of their timidity on gas, this issue will really bite.
It’s extraordinary the political leaders of both parties in our two biggest states can’t see where this gas debate is going.
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