Nervous energy on power plan
Craig Kelly, the chair of the Liberal Party’s backbench environment and energy committee, had a very uncomfortable night on Monday. The outspoken climate change sceptic is one of the key players Malcolm Turnbull needed to win over to the latest national energy policy. Kelly had received a late-night briefing after cabinet had agreed to kill off a clean energy target (CET) and replace it with a national energy guarantee. He wasn’t sure he liked what he heard.
Kelly told the government party room that after a night of tossing and turning, he now could back the policy. “I am now convinced,” he said. “When I saw Senator Di Natale attacking it, I knew we were on the right track.” The Greens leader was outraged on morning television and took his anger into the senate in even stronger terms: “What we’ve seen today is the total and complete and utter capitulation by a cowardly and spineless prime minister who doesn’t have the ticker to stand up to the pro-coal lobbying side of his own party and to stand up to the likes of the Nationals.”
Richard Di Natale attempted to bring on an unscheduled debate immediately in the senate. He was not supported by Labor. The opposition senators said his protests were premature because no one had yet seen the details of the new national energy guarantee.
Despite Labor’s valid concerns over a “lack of homework” behind Tuesday’s announcement, it is waiting to see what comes from the frantic activity now going on behind the scenes to convert an eight-page thought bubble into a serious policy that will survive changes of government.
Don’t forget, this policy has to set a framework that will encourage investment decisions going out beyond 2030 – no current politician will be in government or even parliament to see the results or consequences of their handiwork. One senior Labor strategist says, “We are looking to see if we can scale up in government what Turnbull is proposing.”
And there are hopeful signs. They explain Kelly’s initial unease and the doubts raised in the party room by a trio of coal champions: Tony Abbott, Matt Canavan and George Christensen. The “game-changer” policy, as Turnbull calls it, has two elements that marry energy reliability with our Paris emission reduction commitment of 26 to 28 per cent on 2005 levels by 2030.
The “reliability guarantee” will require utilities to meet the right level of dispatchable energy from sources such as coal, gas, pumped hydro and batteries. This will be set by the regulators. The other “emissions guarantee” will be set to contribute to our international commitments. Again, the level will be determined by the Commonwealth and enforced by the regulator. The implied threat is loss of licence for non-compliance but that is a detail we are yet to see.
So what we have is a baseline determined by the 2030 arrival point and the freedom of energy companies to meet their imposed targets whatever way they like. As Labor’s Mark Butler says, this will certainly mean a secondary carbon trading market. Sure, not established directly by the government but it will create the circumstances for the electricity utilities to set one.
In the government party room, the penny dropped for Christensen. He remarked loudly enough for those around him to hear, “This sounds like a cap and trade system to me.” It was precisely this rejection of anything that looked like an emissions trading scheme or a price on carbon that forced Turnbull and his energy minister, Josh Frydenberg, into the embarrassing contortions of the past four months.
The Australian’s economics writer, David Uren, saw right through it. He said the proposed emissions guarantee “is the carbon tax you get when you ask a regulator to design one”. While Frydenberg boasts it’s a policy “that delivers lower electricity prices”, and means no subsidies, no taxes, no trading systems, Uren is not alone in describing this as “a fantasy”. He cites a minister ridiculing the economic modelling as something devised “to make astrology look good”.
At the level of retail politics, this is worrying government MPs. One says voters probably can’t understand the complexities of the policy debate but they sure understand their electricity bills. And even if we take everything the government is saying at face value, the promise of lower power costs won’t start until 2020 – after the next scheduled election. Even so, none of the government’s key players – the prime minister, the energy minister or the treasurer – will give a guarantee that energy prices will be cheaper. The chairwoman of the new Energy Security Board, Kerry Schott, told the ABC that “no one can give such guarantees”. Bill Shorten homed in on this vulnerability with his first question in parliament on Tuesday, asking for a guarantee on when prices will start coming down. Of course, it could be vulnerability for Labor if Turnbull wins the argument over the cost of Labor’s 50 per cent renewables target by 2030. What we are arguing about is not relief in the short term but in the decades ahead, which is leaving many voters cold.
The political pressure put on the Energy Security Board and the regulators to come up with an alternative to chief scientist Alan Finkel’s CET was utterly transparent. Finkel’s work took more than six months and consisted of wide stakeholder consultation. By the board’s and government’s own admissions, that work is still to be done for their alternative. The latest prescription reads like a back-of-the-envelope calculation within the parameters of no emissions intensity scheme and no continuing subsidies for renewable energy. All of this is designed to second-guess Tony Abbott and his fellow travellers in the Liberal party room, as well as the Nationals. There wasn’t even time enough for modelling the price-saving for consumers. It was obvious this saving had to be bigger than Finkel’s $90 a year. So, bingo: up came $115.
Turnbull bristles at any questioning of this number. He berated the ABC’s Sabra Lane for daring to question the experts and accused her of not respecting them. Except the chairman of the Australian Energy Market Commission, John Pierce, admits no modelling had been done. In a briefing to the opposition, attended by Frydenberg, Pierce said the figures in the policy were a “judgement call”.
Turnbull was quick to claim endorsement from business organisations, the Grattan Institute think tank and the utility companies. The fact of the matter is they are, like the nation, desperate for the political cage fight to end. The green light from them is for the hard work to begin on turning the embryonic policy into a workable plan. It probably is the last best chance there is for any sort of breakthrough, depending on what survives from negotiations with the states.
Victoria, South Australia and Queensland are not impressed with the cold shoulder being given to renewables. Not quite the hostility displayed by Abbott, who as prime minister tried to shut down the industry, but the reception is still nowhere near where we need to be. Especially if we genuinely care a damn about the Paris climate agreement and its 2030 emission reductions, let alone the 2050 goal of keeping global temperature rises to 2 degrees Celsius or lower. Concessions to the states or federal Labor on this could still lead to the very party revolt the prime minister has turned himself inside out to avoid.
Turnbull, by one report, “shirtfronted” Abbott in the party room. He cut him short on his demands for a “political” discussion. But the prime minister’s capitulation to Abbott as spelled out by the Greens and Labor has substance. Sure, Abbott’s demand that we renege on our Paris commitments was ignored, but his urging for the government to build or fund a new Queensland coal-fired power station has not been dismissed. Indeed, Turnbull said the $5 billion Northern Australia investment fund could be utilised for that. The wheel certainly has turned: subsidies for renewables canned and their adoption stalled, but money there to help out coal. It is hardly the commitment to effective action on climate change about which Turnbull used to speak.
There is an irony in all of this. Turnbull moved away from the CET because Abbott and many in the party room thought it was too close to Labor’s policy. Ditching it was to emphasise product differentiation and, according to government insiders, their best chance of getting back in the game. What happens if Labor accepts the worked-up version of the national energy guarantee? The energy game may be changed but the political game would still be on Labor’s goal line.
This article was first published in the print edition of The Saturday Paper on Oct 21, 2017 as "Nervous energy". Subscribe here.