Australia energy policy turns into a farce and a public circus

The circus that has become Australia’s federal energy policy came into full view on Wednesday, as the Coalition government danced around the very policy decisions that it needs to make, and energy utilities intensified their own internal warfare over who was to blame for soaring electricity prices.

Prime Minister Malcolm Turnbull and energy minister Josh Frydenberg summoned senior energy retailers to yet another summit, supposedly to get them to promise they will tell consumers how badly they are being screwed on prices, and what they can do about it.

Turnbull says that two million Australians are paying more than they should be for electricity, apparently those attached to so-called “standing offers”. But this misses the point completely: All Australians are paying way more than they should be for electricity.

It costs as much to plug in a kettle into a socket in the major cities and regional centres as it would in a remote community on diesel. It is a complete and utter failure of markets, policy and regulation.

And while the energy CEOs sat there trying not to laugh out loud, yet another series of reports were released highlighting the real issues that are not being addressed: the rampant gaming of wholesale markets, the need for a clear long-term policy, and why ambitious clean energy targets might be the quickest way to slash prices.

The gaming of wholesale markets has been well known, and documented, for some time. It is one of the key reasons why one of the country’s biggest energy users is pushing for a change in market rules, and why that rule change was so fiercely resisted by the coal and gas generators.

Snowy Hydro, which has also opposed those changes, had the gall on Wednesday to point the finger at others over the rise in wholesale prices, and to complain about the lack of subsidies for its Snowy Hydro generators, built decades ago. (It also claimed the RET amounted to 20 per cent of bills, which is rubbish).

As has been documented by various reports by the Australian Energy Regulator, Snowy itself is not above manipulating markets for its own profits, as we outlined here. It is all perfectly legal, and what ACCC chief Rod Sims has admiringly called the “market at work”.

Consumers have been comprehensively screwed on all three components of their electricity bills – by the networks, and more recently by the fossil fuel generators, and the big retailers (often the same companies).

The generators and networks are now blaming each other. Snowy’s Paul Broad lashed out at the gold plating of networks, saying consumers had been “done in the eye”, while the networks have in turn lashed out at the obvious manipulation of prices by the gen-tailers.

Smaller retailers – such as Energy Locals and Enova – have pointed out there is a pox on them all.

A report by Schneider Electric – a heavyweight in the global energy industry – suggests that AGL and Origin Energy in particular had been bidding up prices 50 per cent more than they should have been in NSW, through aggressive and opportunistic pricing, adding $35/MWh to the wholesale component of retail bills.

The Australian Conservation Foundation released a report outlining what is already known, that the government’s current target of a 26-28 per cent cut in emissions by 2030, and the outline of the Finkel Review’s Clean Energy Target, is clearly inadequate.

But it also contained modelling by Reputex which showed that if the target was raised, to a minimum 45 per cent as recommended by the Climate Change Authority, or even to 63 per cent to meet its share of an increasingly urgent climate goal, then this would actually result in lower wholesale prices, because of the influx of cheap wind and solar.

That is less than half the price of the average wholesale price in any state in 2017, and nearly two-thirds cheaper than in Victoria and South Australia.

Of course, these reports were dutifully ignored by Turnbull and Frydenberg, who are still – ostensibly – trying to massage even a modest CET design passed the right wing of their own party, and holding out that there is a role for new plants that are hilariously being described as “clean” or “low emissions”.

But this conservative rump remains bitterly attached to their climate denial, their obligations to fossil fuel lobbyists and their bizarre opposition to any new technology that threatens to upturn their horse and cart. And they have the numbers to intimidate the PM.

The Coalition has only itself to blame for the political mess it has created, scrapping the carbon price, creating an investment drought as the right wing tried to scrap the renewable energy target, and then seeking to pass the blame on to state Labor governments frustrated by the inaction in federal parliament.

But the utilities have also only themselves to blame for the business mess they have created – having taken advantage of every wrinkle and hesitation in climate and energy policy, an obliging regulatory regime and an uninformed consumer base to maximise their returns.

We can now expect an outright war between the networks and the gen-tailers as they fight for the right to engage with a consumer market that sees no choice but to take matters into its own hands, and invest in solar and storage.

Follow on Twitter: @GilesParkinson