Power crisis demands apolitical leadership

Friday 8 September 2017
Image of John Hewson

Opinion: Although you may win the daily media battles in politics, you may still lose the electoral war. You can go on, day in, day out, blaming others and scoring points on your opponents, only to progressively lose sight of the reality of the issue and of what actually matters to the electorate such that, in the end, the issue consumes you and they vote you out.

The politicking over energy through the past several years is now coming home to roost. While the major participants have been almost totally self-absorbed in what has been a counter-productive race to the bottom, electricity and gas prices have risen sharply and consumers have been left almost unable to understand their rapidly mounting power bills, with no clarity as to the way forward, with no "guarantees" as to the security of supply at an affordable price.

The discussion has been riddled with false claims, misrepresentations, accusations, exaggerations and hypocrisy, compounded by a multiplicity of "solutions", including carbon pricing, more or less coal, more or less gas, more or less renewables, batteries and storage, Snowy Hydro, even "shirtfronting" power company CEOs and so on. Gas supplies to the domestic market have been restricted and major private power companies and a state government, operating as both generators and retailers, have been able to exploit the situation by gouging the wholesale and retail prices.

The result is total confusion and uncertainty, with most consumers convinced they are being "ripped off", because governments have failed to recognise the severity of the problem and deliver a solution.

With households struggling to meet the rising costs of living, with their wages flat and jobs increasingly insecure and many industries struggling to remain viable, rising power prices and the uncertainty of the future, will see this issue dominate the next several state and federal elections. Indeed, Queensland may go to the polls early, before years end, South Australia is due next March, with the federal election to follow.

Pressures are mounting as reality begins to bite. This week's AEMO assessment of future electricity generation capacity soon focused attention on AGL's planned closure of the Liddell power plant in 2022 and the possibility of a substantial shortage of base load power. The government was caught short, so it tried vainly to create the impression that a way would be found to extend the life of the plant. It had to admit that the "magic solutions" of a 50 per cent expansion of the Snowy Hydro and a new ultra super critical coal-fired plant, could not be finished in time, even if they did actually get off the ground.

But, without an actual "solution", the government again resorted to point-scoring against the Opposition, and Labor more broadly, arguing that it was the South Australian and Victorian Labor governments that had overseen the closure of the Northern and Hazelwood coal-fired base load plants, with no alternative back-up. And that it was the Shorten Opposition that had a policy to accelerate the closure of coal-fired power plants. No joy in any of this, again, for the poor consumer – only hollow rhetoric!

As new coal-fired power can only make any sense if you deny the global climate change imperative to reduce emissions, the concept of filling the identified "generation gap" in the early 2020s with a new super critical coal-fired plant is unbankable. It could only be built if the government jettisoned its Paris commitments and funded it.AGL may, in the end, sell Liddell to another private sector operator, or even the government itself, prepared to risk up to another billion dollars to extend its life but, again, this would be seen as contrary to the Paris commitments and complicating any transition path to meeting the 2030 commitments.

It would be possible to fill the gap with a combination of storage retro-fitted to existing solar and wind farms and by meeting the Finkel recommended "dispatchable power" on new farms, together with a significant shift to solar thermal base load generation.

There are a number of solar thermal technologies that can deliver 24/7 base load power at a wholesale price that is about a quarter of the recent average retail price in South Australia, and battery technologies with a greater capacity, longer life, and a "throughput cost" that is a fraction of the recently announced Musk battery. These projects are bankable and affordable.

It is an important recommendation of Finkel that adopting a clean energy target would set a clear direction to achieve the 2030 commitments, allowing competition between technologies to specify and deliver the most cost effective path.

However, our political leaders must now reap what they have sown. They have given voters every reason to disbelieve anything they say or promise. They have created a unique set of circumstances, with their inability to ensure lower power prices, together with their failure to address other key elements of the cost of living, for a substantial protest vote, building on the one in three that didn't vote for one of the major parties at the last federal election.

Short of controlling electricity and gas prices, the government is now powerless to deal with the issue effectively in the near term. The issue demands apolitical leadership.

This article originally appeared in The Canberra Times. Written by Honorary Professor John Hewson, Energy Change Institute member and former leader of the Liberal Party.

Updated:  23 November 2017/Responsible Officer:  Director, Energy Change Institute/Page Contact:  Webmaster