Coalition’s power threat is good intervention, says AEMO chief Audrey Zibelman
The operator of Australia’s electricity grid said the Morrison government was justified making an interventionist threat in the power sector.
The operator of Australia’s electricity grid said the Morrison government was justified making an interventionist threat in the power sector as it has given investors the chance to respond before making any move of its own in the market.
The federal government has given companies until April to commit building 1000MW of new power capacity to ensure there was a like-for-like replacement for AGL Energy’s Liddell coal plant or it will build its own gas plant through the Snowy Hydro group which it owns.
The move was slammed by the Australian Energy Council - which represents power giants AGL Energy, EnergyAustralia and Origin Energy - who warned government interventions or even discussions and ‘threats’ of intervention act as an investment deterrent. Canberra is also prioritising emerging technologies such as hydrogen and carbon capture in a bid to cut emissions and considering methods to lower gas prices and free up supplies.
The Australian Energy Market Operator said intervention was always a part of running an essential service like the power grid and could trigger investment by laying out a clear vision.
“We should always expect that there is going to be government intervention in the these types of essential services - but the question is it good intervention or bad intervention,” AEMO chief executive Audrey Zibelman told a business forum on Friday.
“Good intervention to me is when government is intervening to set vision for a future, it‘s helping to invest in new technologies, it’s helping in R&D and really speeding the advancement of technologies. What we don‘t want government to have to do is to intervene because they’re fearful that the markets are not providing value.”
EnergyAustralia has questioned the continuation of Scott Morrison’s interventionist approach in the electricity sector arguing its planned $400m Tallawarra gas plant in NSW had been delayed due to uncertainty over the federal government’s plan to underwrite generation.
Still, the AEMO chief said the market has been given the chance to respond to the government’s move.
“I wouldn’t say its bad intervention unless it‘s putting us in a position because we’re not allowing the market to respond. The good intervention is when we set the regulatory reforms and the vision up so the market can respond,” Ms Zibelman said.
A series of interventions by the Morrison government last year raised tensions with the industry, concerned sovereign volatility made it more difficult to weigh up and sanction investments.
The so-called ‘big stick’ legislation was introduced last year to tackle energy market manipulation and followed Canberra’s introduction of a safety net for electricity prices through the default market offer.
The government’s stalled underwriting generation scheme has also been blamed for distorting investment signals and making it more difficult to commit funds to pending projects that would add new baseload supplies to the grid.