Energy remains the cutting edge of the political miasma we are living through but few of the players have an understanding of the market or government limitations on how to make it work better. Some think the market’s travails are not caused by government and new regulations will fix it all. Madcap ideas like price fixing and (heaven forbid!) a Royal Commission are mooted.
So what measures are needed? At the Commonwealth level, aside from exiting the Paris Agreement (or just staying in and doing nothing), two sets of policy changes are necessary.
1. Abolish all subsidies including:
- government direct disbursements through the Australian Renewable Energy Agency (ARENA) and the Green Bank (the Clean Energy Finance Corporation)
- cease cross subsidies through the renewables: immediately discontinue the SRES, (roof top solar panel subsidies); cease new subsidies to wind and large scale solar under the LRET, including putting the default cost of failure to meet the obligations at zero, without which the windfarms will continue leeching subsidies from the electricity consumer for the next dozen years
- drastically prune the bureaucracy, including abolition of the Energy Security Board, pare the proven inefficient Canberra bureaucracy, abolish energy economic forecasting bodies in the CSIRO, defund the CO2 CRC (“helping industry to reduce greenhouse gas emissions”), and various other agencies involved in carbon capture and storage (funding of at least $200 million in the pipeline); all of these, like the renewable subsidies have amounted to negative value-adding expenditures.
2. Adopt measures to rectify the destruction of incentives to invest in energy induced by government interventions:
- require AGL to divest Liddell, selling it to the highest bidder
- set up an auction for long term government contracts for dispatchable electricity, a replacement on or near the site of Hazelwood being one with another in Queensland or NSW
- remove any legal impediments to nuclear power, which might be a better option than coal in South Australia.
See the full piece at Quadrant.
PS RobK makes the interesting point that no forced divestiture would be necessary if the subsidies are gone since it would be in AGL’s interests to keep Liddell on or simply sell it. Depending on how the subsidies are removed this may be correct.
A further issue is how to deal with the existing wind which even if subsidies are removed with its near zero marginal costs will become “must run” facilities and disrupt the operations of dispatchable coal fired stations designed for constant operation