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End the farce and get serious about long-term energy policy

The Melbourne International Comedy Festival ends this week, and I wish I could say the same about the unintentional comedic stylings of our national energy debate. It’s an epic farce which has stretched on for more than a decade with no end in sight

Like a lot of comedy, it has its roots in tragedy. Investors have poured more than $10 billion into Australian clean energy projects over the past year because of the Renewable Energy Target (RET). But the general silliness of recent weeks doesn’t fill them with great confidence that the good times will continue – or that our politicians will suddenly agree after years of professional tomfoolery.

This Friday, Australia’s Commonwealth, state and territory governments gather for the latest round of debate at the COAG Energy Council. Energy and Environment Minister Josh Frydenberg is consulting with a massive group of players across the energy and business sectors, trying to secure agreement for more work on the National Energy Guarantee (NEG).

But at the same time Mr Frydenberg is on a charm offensive with the states, he is also managing his own government’s two-track response to energy policy. The efforts of the Turnbull Cabinet are being undermined by a group of Malcontents who can’t – or won’t – accept the new reality in the energy sector: that clean energy is the new black.

No matter how many forums are convened using the name of Sir John Monash or someone else, the basic facts remain the same: Old coal plants are closing, replaced by renewable energy. The smart money is in wind and solar projects, increasingly combined with storage such as batteries and pumped hydro. The RET stops encouraging new projects in 2020, meaning the level of future investment depends to a large degree on the debate we are having right now.

Details continue to emerge about the NEG. Given the often combative nature of energy over the last decade, people are right to be wary. But so far the Energy Security Board (ESB) seems to be acting in good faith to deliver a workable policy. It now has the potential to do what it says on the label – deliver affordable, cleaner and reliable electricity.

At this Friday’s meeting we would like to see get agreement to start developing a robust policy architecture with bipartisan support. Unless everyone is prepared to work towards a positive outcome we are back to square one. Again. There have been no winners from the carbon wars.

It is certainly not a perfect policy as it stands. We have been concerned about the investment signal for new energy generation from the beginning. This will largely depend on the level of emissions reduction built into the scheme. The higher the ambition, the more it will encourage low-cost renewable energy to drive down power prices and keep the lights on as old coal plants close down. At the moment the emissions target is nowhere near high enough.

Other technical issues also need to be worked through. Emission offsets shouldn’t be included in the policy if we are serious about encouraging new investment in generation that will drive down power prices. States and territories should not be restricted in committing to and delivering on higher levels of renewable energy ambition.

But possibly the greatest challenge for the Energy Minister is a frankly bizarre situation where the rump of the party that is supposed to champion business and competitive markets is leading a call for energy socialism. It was one thing for the newly-formed Monash Forum to demand that the government build a new coal-fired power station. But it was quite another for Tony Abbott to call for the government to seize AGL’s Liddell coal-fired power plant to stop it closing in 2022. What sounds like satire is the reality of our energy debate. Private investors are rightly confused and concerned.

Hopefully this week’s COAG Energy Council meeting can put this kind of silliness behind us and energy ministers will agree to take the next step. Investors are ready to continue to build the power stations of the future. But our policymakers must put the energy policy wars to an end, and work towards a long-term market that gives confidence to investors – even if it seems a long way off.

The opinion piece was originally published in The Australian on 20 April 2018.