Clear national energy plan does not need a ‘big stick’

As occupants of an energy superpower — with abundant supplies of coal, gas and uranium, and immense potential in hydro, solar and wind — Australian consumers and producers should be able to access cheap and reliable power. But policymakers have botched that resource bounty, delivering an energy system that is expensive, incoherent, overly fussy, arbitrary and unreliable. The past decade has produced a policy debacle, driven by political expediency, confused goals, cult-like climate change activism and internecine bastardry. There is no energy policy consistency — save for the purist dogma of green activists and agrarian welfarists — given it is set by bouts of pragmatism, internal crisis and kneejerk responses to events. Perhaps the May 18 election result provides an opportunity for a policy reset, although the early signs are not promising. In an interview with national affairs editor Simon Benson, Energy Minister Angus Taylor revealed the “big stick” laws aimed at energy companies would be a priority when parliament returns, most likely in July.

The proposed legislation would allow the government to seek orders divesting an energy company of its generation assets if it engaged in market misconduct. In February, the Morrison government deferred the “big stick” after the Greens (of all people) threatened to prevent taxpayer funds being used to underwrite new coal-fired power stations. Six Queensland Nationals MPs ran a revolt, demanding the Prime Minister revive the measures, given the state government owns the only retailer, all of the poles and wires, and 70 per cent of the generation capacity. The rebel MPs also called on the Morrison government to guarantee a new power generation facility in Queensland, most likely a cleaner coal plant. But the laws were not voted on before parliament was prorogued.

Naturally, energy companies are alarmed by the “draconian” prospect of the “big stick”, especially imposed by a Coalition of supposed free marketeers and champions of capital. Origin chief executive Frank Calabria said this week of laws designed to break up big energy companies: “I don’t think that’s the way to go about achieving lower prices and better outcomes for customers.” In truth, divestiture is a blunt and extreme weapon, against the ethos of capitalism, and sounds an alarm to global investors that there is a sovereign risk to doing business here. But Mr Taylor argues the divestment powers are a last resort, at the “pointy end” of broad-ranging laws that target the worst abuses of market power, including manipulation of wholesale markets and price gouging in the retail and derivatives markets.

Again, as the energy companies fear, the legislation seems arbitrary. Mr Taylor is on stronger ground in calling on the states to co-operate with Canberra to fast-track approvals for new power generation capacity. The Morrison government has a shortlist of 12 projects providing an extra 4000 megawatts into the national electricity market. Businesses have threatened to pull $2 billion of planned investment from NSW as frustrations mount over delays in approving Santos’ Narrabri coal-seam gas project. Mr Taylor said failure by state governments to put more gas supply and dispatchable electricity into the market risked “dire consequences”, including higher power prices, an exodus of manufacturing offshore and the loss of industrial jobs.

Such a failure, however, would be a collective one, another chapter in our inglorious history of economic self-harm. We are stuck with a mishmash of federal and state laws — including gas reservation rules, onshore exploration moratoriums and supply strikes — but no national policy coherence. Persistently high power prices, especially gas prices on the east coast, threaten the viability of heavy industry. In March competition tsar Rod Sims called on suppliers to provide immediate price relief to gas users. This week big energy users called on the federal government to subsidise the price of gas by setting up a taxpayer-funded gas-buying unit and to extend the “big stick” to gas.

Perhaps Australians have very short memories, but there’s a long line of costly mistakes when governments enter the commercial sphere. After an election where Queensland voters played a critical part in the Coalition’s victory, there will be calls to underwrite new energy supply, including regional coal-fired power stations. Four years ago, the Abbott government produced an energy white paper to provide consumers and businesses with a blueprint for electricity generation, transport and the resources sector. It was a free-market strategy. More competition would keep energy prices down, with an end to electricity subsidies and more privatisation of poles and wires. There would be an end to the states’ moratoriums that block gas production, better energy efficiency and a technology-agnostic approach to future energy sources. Those principles remain sound but were haphazardly mixed in the mash-up that became the rejected national energy guarantee under Malcolm Turnbull. We need an energy plan that is clear, pragmatic and integrated rather than ideological. A sensible market-based approach would secure long-term investment, reduce power prices and reboot the economy.