Monash Forum’s puzzling energy agenda
While parliamentarians were gathered in Canberra last week ahead of the pre-budget break, the proponents of what is now calling itself the Monash Forum began circulating a “letter” about energy policy.
Many Liberals declined to sign it, believing it was so closely linked to poisonous leadership politics that it could not do anything but cause trouble.
The Monash Forum is named after General Sir John Monash, the decorated Australian World War I military commander who was also a pioneer of brown coal power generation in Victoria.
The Liberals who generated the group and its letter – Victorian MP Kevin Andrews, Tasmanian senator Eric Abetz and former prime minister Tony Abbott – gained the early signature of Queenslander and chair of the Coalition’s energy committee Craig Kelly, along with those of former Nationals leader and deputy prime minister Barnaby Joyce.
But it was Queensland Liberal National MP George Christensen, who sits in the Nationals party room, who was persuaded to circulate the statement among his Nationals colleagues and urge them to sign it.
In their Tuesday morning party meeting last week, Christensen presented it as a bid to amend the government’s proposed energy blueprint, the national energy guarantee (NEG), ahead of its being put to the states and territories later this month.
The Saturday Paper has been told he explained that the letter was aimed at pressing the government to more firmly entrench the future of coal as part of the energy mix and demand an end to subsidies for renewable energy sources.
Many Nationals agreed to sign the letter on that basis, being strong supporters of coal. But now some are saying privately they feel as though they were duped and that the forum is really a political stalking horse whose agenda is at least as much about Malcolm Turnbull’s leadership as fossil fuels.
Their names are being used to give the appearance of numbers behind the Monash Forum and weight to its demands, as well as to generate a debate many suspect has the party’s leadership as its true focus.
Not actually delivered directly to the prime minister or energy and environment minister Josh Frydenberg, the Monash Forum letter was instead placed at the centre of public debate this week, just as the next Newspoll was about to be put into the field – the one expected to deliver the 30th negative result for the Coalition under Turnbull’s prime ministership.
Turnbull and his supporters have been bracing for No. 30 since it became clear many months ago he would reach the very benchmark he nominated as a key reason for ousting Abbott in 2015.
The poll is being taken this weekend, with its results due to be published on Monday.
On Wednesday this week, Turnbull was in Rockhampton, alongside Nationals leader Michael McCormack and resources minister Matt Canavan, defending his government’s energy policy.
Canavan’s name had been linked to those initially endorsing the Monash Forum’s statement. He later gave an interview to Sky News, distancing himself from the exercise.
“I don’t think coal needs subsidies,” he said. “It doesn’t need government grants or investment. It competes on its own two feet and if we just allow the market to work, and that’s what the government wants to do, and end a lot of the subsidisation of other types of energy, coal-fired power will work.”
Despite this view, Canavan had been a public supporter of the Adani company’s bid for a concessionary loan to build a railway line to its proposed Carmichael mine in the Galilee Basin, a bid that collapsed when the Queensland government used its veto power to block it.
Before the forum emerged, Turnbull and Frydenberg were already looking for ways to keep coal in the mix for longer, both to address the concerns of colleagues in coal seats and to avoid corporations using the closure of coal-fired power stations to force up power prices.
In recent weeks, the pair has moved again to push for the Liddell power station in the New South Wales Hunter Valley to be kept open beyond its scheduled closure in 2022.
Turnbull’s alternative energy brainchild, a revamped Snowy Hydro scheme dubbed Snowy 2.0, cannot be operational until 2024-25, so the government needs something to stop prices surging in the interim.
Frydenberg met with Manufacturing Australia executives last week, where the Liddell issue was discussed.
Made aware that energy producer Alinta Energy was interested in increasing its share of the market, Frydenberg then contacted its chief executive Jeff Dimery to encourage him to make a bid for Liddell.
The owner of the Liddell power station, AGL, has resisted all encouragement to keep it open beyond 2022 and all offers to buy it, insisting its customers need the power it generates until then and that it has other plans for the infrastructure after that.
Having recently bought the Loy Yang B power station in Victoria, Alinta Energy approached AGL on Tuesday night and foreshadowed a $1 billion offer, conditional on being able to take over the station in September this year.
Dimery says his company has not received any government incentives or assistance, other than in brokering the talks. Turnbull contacted AGL managing director Andy Vesey the same night to encourage him to consider the proposal seriously.
“Really, AGL should do the right thing by their customers, by the community and really by their own shareholders by either keeping this plant going for another four or five years or sell it to somebody who is prepared to do so,” Turnbull told journalists on Wednesday. “It is manifestly in the public interest that that happens.”
At time of press, AGL continued to declare the asset not for sale.
Frydenberg and Turnbull are convinced AGL is only persisting in the plant’s closure because it would push up prices and boost the value of its other plant at Bayswater.
They are understood to be equally convinced that the Monash Forum is much more a political ginger group than genuine energy lobby.
Group members Craig Kelly and Eric Abetz have both denied that, insisting it is about good policy rather than politics.
Supporting the Turnbull view is the timing of the group’s public intervention and the fact that this is exactly the issue on which Turnbull’s leadership foundered in 2009.
Back then, Abbott marshalled support against Turnbull’s plan to have the Coalition support the then Rudd Labor government’s proposed emissions trading scheme, and won the ensuing ballot by a single vote. Currently on his annual Pollie Pedal for charity, Abbott is due to ride through Victoria’s coal-rich Latrobe Valley on Monday.
Critics of the forum also note that when he was leader Abbott was vehemently opposed to government subsidising industry. He refused to countenance a much smaller subsidy to rescue Australian fruit canner Ardmona but now wants the government to fund a power station.
Some conservative Liberals are downplaying the critics’ suspicions.
“The idea that a group of backbenchers who might be speaking about policy is some sort of nefarious gathering I find very surprising,” Liberal MP Michael Sukkar observed on Tuesday.
NSW Nationals senator John “Wacka” Williams hasn’t signed the letter but says he backs the pro-coal push. “I support colleagues who are pushing for a reliable, cheap electricity supply,” Williams told The Saturday Paper.
Unsurprisingly, the Labor side see the forum as an opportunity to criticise Turnbull and his party. “The No. 1 problem contributing to growing energy prices in Australia is the lack of policy certainty,” Opposition Leader Bill Shorten said on Thursday. “Every time Mr Turnbull takes a position at breakfast time it’s moved by lunchtime because the right-wing knuckle-draggers of his party keep beating him up. This is not the way to run a country.”
One of the forum’s stated aims – to belatedly amend the NEG – is also puzzling some observers, given the Coalition party room has already endorsed it.
Frydenberg secured that support late last year and is set to put it to state and territory energy ministers for preliminary approval on April 20.
Even if enough of them were to support an adjustment, Coalition MPs will have no opportunity to vote to endorse it until after that, when they meet again at the start of budget week in early May.
As it is currently designed, the NEG aims to push power prices down by making more energy available, while also increasing stability and reliability in the system.
The plan depends on the production of dispatchable power – power that can be stored and used as needed, rather than having to be used immediately.
Dispatchability has been what advantaged coal-fired power over most renewable sources because the technology had not existed until recently to enable wind and solar power to be stored.
It is only the development of that storage technology – and the fall in production costs for renewables as the capture technologies also advanced – that has made viable a policy such as the one proposed by the government.
The NEG puts two sets of obligations on energy producers.
The first is a reliability guarantee, requiring retailers to buy a minimum percentage of their energy from dispatchable sources that can be adjusted to meet the real-time demands of the grid.
As that storage capability develops, those will increasingly include the traditionally intermittent power sources such as wind and solar power along with baseload sources such as coal, gas and pumped hydro.
The NEG would remove the existing subsidies for renewables, relying on falling production costs and the improving technologies to make them competitive.
The reliability guarantee needs state and territory governments to also legislate it, just like the existing national electricity market.
The second obligation is described as an emissions guarantee, to be legislated federally, which requires retailers to ensure their overall energy mix from a range of sources stays below a set level of greenhouse gas emissions.
The contracts they entered would have to supply energy at specified emissions levels to enable Australia to meet its international commitment to cut emissions overall by 26-28 per cent on 2005 levels by 2030.
It’s this second dimension that connects it to addressing climate change and, government sources argue, makes it the best chance of securing bipartisan support for a market-based mitigation system since the failed attempt of 2009.
Frydenberg is lobbying his state and territory counterparts for their support. Thus far, only the ACT Labor–Greens government is threatening to oppose it, arguing it would not transition away from fossil fuels fast enough.
Turnbull says the plan is designed to make that transition but rejects the Monash Forum’s argument that the NEG, as designed, favours renewables over coal.
“The future for energy in Australia is one that includes all technologies,” Turnbull told ABC Radio. “Coal, wind, solar, gas, hydro – they are neither good nor bad. They have no moral characteristics. They have got certain physical characteristics. All of them have a role to play.”
The Monash Forum’s proposal says coal remains the superior form of reliable baseload power. It focuses on the mothballed Hazelwood power station in Victoria, urging the government to buy and reopen it at a cost it estimates at no more than the $4 billion earmarked for Turnbull’s alternative Snowy 2.0 proposal.
Some commentators have argued Turnbull effectively invited alternative proposals such as the one from the forum by unveiling Snowy 2.0 before conducting a feasibility study.
Treasurer Scott Morrison rejects the Monash argument, saying a new coal-fired power station would take years to build and the energy produced would cost twice as much.
He said even a revamped Hazelwood power station could not produce coal power as cheaply as previously because the cost of replacing old infrastructure would inevitably be passed on.
Morrison estimated that rather than producing energy at $30-$40 a kilowatt hour wholesale, electricity from a high-efficiency, low-emissions – or HELE – plant would cost more like $70-$80 a kilowatt hour in five or six years’ time.
“It is false to think that a new coal-fired power station would generate electricity at the same price as old coal-fired power stations for the obvious reason that the asset has already been written off,” Morrison told a Sydney seminar audience.
“So you don’t just open up one down the road and all of a sudden it’s producing power at the same price as Bayswater or any of the others. That’s just not an economic fact.”
The Grattan Institute’s Tony Wood says government intervention in the market – a form of renationalisation – would spook the private sector and exacerbate the very thing causing the price problem: the lack of a bipartisan, stable policy direction on climate change and energy.
He says that with private investors abandoning the fossil fuel market, the likelihood of being able to sell off a government-owned coal-fired power station in future would be slim, turning it into a white elephant.
Alinta’s Jeff Dimery says he also does not believe the federal government should be in the business of subsidising or nationalising coal production.
“We would rather government stick to things like building hospitals and running schools and let industry take care of the energy sector,” Dimery told Sky News. “We’re happy to step up to the plate. We’ve made big investments to this point and we’re happy to fund the next lot of power stations. We do so on a commercial basis so we’re only interested in this transaction if it’s commercial.”
The Monash Forum’s interest is more complicated. But its choice of name has elicited a blunt response from Monash’s descendants.
“We disassociate ourselves specifically from the Forum’s use of the Monash name to give their anti-science, anti-intellectual argument an air of authority,” seven of Monash’s descendants said in a statement issued on Wednesday, asking that the name be dropped.
The family members acknowledged Monash had championed the use of coal but challenged the assumption that he would do so today.
“That was in the context of the time, almost a century ago, when coal-fired electrical generation was the leading technology,” they said. “We are sure that, today, he would be a proponent of the new technologies – for example, wind and solar generation – rather than revert to the horse-and-buggy era.”
Malcolm Turnbull will also spend next week energetically urging Australians – his colleagues in particular – not to look back.
But the real challenge will be to generate a sense that they have something to look forward to.
This article was first published in the print edition of The Saturday Paper on Apr 7, 2018 as "Coal loading". Subscribe here.