Grattan joins chorus debunking need for Coalition’s coal underwriting plan

“Grattan Institute does not support an underwriting mechanism to encourage investment in the National Electricity Market (NEM),” a summary of its submission says.

“The Commonwealth and state governments should instead focus on establishing a stable climate-change policy and ensuring the NEM is well managed. Government intervention should be considered only if there is strong evidence that the market has failed, and even then only as a last resort.”

The Institute says there is no evidence of a market failure, and it joins the likes of The Australia Institute, the Clean Energy Council, former CEFC chief executive Oliver Yates and others in opposing the move.

The federal government is seeking to rush the program and is trying to lock in a contract by March, before the government goes into a mandatory caretaker period.

Yet details of the program remain vague, do not conform with ACCC recommendations, and appear designed only to encourage “base-load” or “24/7” power, none of which is needed in an emergency given the current oversupply in the grid.

Grattan Institute also warns that such decisions could compromise any future shift towards sensible climate policy.

“Government underwriting and ownership of electricity generation assets complicates the relationship between generators and sensible climate-change policy,” it writes.

“An underwriting program could reduce future governments’ willingness to increase the emissions-reduction target if such a move would be detrimental to the profitability of their underwritten assets.

Grattan argues that if it does go ahead, it should be limited to investors with little market share, with identifiable commercial customers, and only to new projects. All these measures were recommended by the ACCC, but tossed out by energy minister Angus Taylor in his rush to embrace existing coal or gas plants.

Grattan also questions the need for the measure as a means to address reliability issues.