Rocky road to renewables ‘could send energy costs soaring’

The $200bn fund manager IFM Investors has warned energy ­prices will increase and security of supply will worsen if Australia botches a rocky path to renewable energy.

Coal in huge piles being prepared for a power station. Queensland and NSW are ­demanding commonwealth compensation to slap a price cap on coal. Picture: David Swift

The $200bn fund manager IFM Investors has warned energy ­prices will increase and security of supply will worsen if Australia botches a rocky path from coal to renewable energy.

As Anthony Albanese edges closer to finalising key planks of his national energy plan before next Wednesday’s national cabinet meeting, senior ministers on Friday attempted to ease tensions with premiers.

After pushback from the NSW, Queensland and South Australian governments over proposals to impose price caps on gas and coal, Assistant Treasurer Stephen Jones said “we’re not about trying to pick a war with the states or with gas companies or coal companies”.

“We’ll work with the states. It’s not like this conversation started today,” he said. “We’ve been working through the issues with the states. We want to ensure that we can get this stuff in place. It’s all about lowering power prices to ensure households and businesses get some relief.”

With Queensland Premier Annastacia Palaszczuk and NSW Premier Dominic Perrottet ­demanding commonwealth compensation to slap a price cap on coal, Mr Jones said “we’re going to do the right thing by the states”.

Assistant Treasurer Stephen Jones. Picture: NCA NewsWire/Gary Ramage

“I just implore the state governments, who in many instances have all the levers over coal prices, which have direct input – they control about 80 per cent of ­energy prices – to have the same concern in mind,” he said.

“This is households, this is businesses. They vote for them as well as voting for us. We want them to bear that in mind as they’re looking at the issues.”

Opposition Leader Peter Dutton said “I think the premiers ­actually are pretty bewildered, as many Australian families are at the moment”.

“Let’s stop hearing about the thought bubbles and all of the talk of different options and let’s hear from the government as to what it is they’re going to do to help families and small businesses,” Mr Dutton said.

IFM, owned by 20 Australian industry superannuation funds, said it was critical the nation executed a high-stakes switch to green energy while recognising commodity market challenges flowing from Russia’s invasion of Ukraine.

“If we don’t manage this part of the transition effectively, and it becomes disorderly and chaotic, we will see energy security and ­affordability suffer, the economy and markets suffer, with an impact on investment returns, and likely an overall slowing of the ­energy transition as well,” IFM chief executive David Neal told the South Australia Investment Conference on Friday.

Funds rating agency Morningstar said Australia’s gas ­industry faced an array of risks from pending intervention ­including a ­requirement for guaranteed domestic supply from ­producers.

High prices and perceived shortages are likely to increase the chances for new developments, potentially lowering regulatory hurdles,” Morningstar said. “The fastest cure for high prices is high prices.”