Capturing the national electorate's response to years of poor energy policy under Abbott then Turnbull

Snapshot of ABC TV Mad As Hell image

As utility bills get harder and harder to manage for those on low incomes, this comes as a slap in the face

In roughly five to six weeks time electricity prices are expected to rise for many people in Queensland, New South Wales, the Australian Capital Territory, South Australia and Tasmania.

Households are expected to pay up to $300-$400 more a year, with the rise in wholesale electricity prices making up est. 45 per cent of a domestic supply bill.

As low-income renters, pensioners and the unemployed struggle this winter with the choice of trying to stay warm without heating or face an impossibly large electricity bill, they might like to remember that all this was very avoidable.

First Prime Minister Abbott and then Prime Minister Turnbull (along with all their MPs and senators) had the chance to keep energy costs lower - but blinded by ideology they refused to do so.

This was The Sydney Morning Herald reporting the Turnbull Government's failure on 8 December 2016:

The Turnbull government has been sitting on advice that an emissions intensity scheme - the carbon policy it put on the table only to rule out just 36 hours later - would save households and businesses up to $15 billion in electricity bills over a decade.

While Malcolm Turnbull has rejected this sort of scheme by claiming it would push up prices, analysis in an Australian Electricity Market Commission report handed to the government months ago finds it would actually cost consumers far less than other approaches, including doing nothing.

It finds that would still be the case even if the government boosted its climate target to a 50 per cent cut in emissions by 2030.

Depending on the level of electricity use and the target adopted, modelling by Danny Price of Frontier Economics found costs would be between $3.4 billion and $15 billion lower over the decade to 2030.  Costs would be $11.2 billion lower over this time assuming average electricity use and the existing climate target.

Of Gas and Hot Air

Energy security became a major political issue following a storm-induced blackout in South Australia late last year.  Instead of the massive storm which knocked over the transmission towers being the “villain”, the Prime Minister and his Energy Minister Josh Frydenberg  blamed the state’s level of renewable (wind) energy for the outage. They have persisted with this version of events regardless of all the evidence to the contrary.

In the months since then politicians and others have had a great deal to say about the national energy grid and its shortcomings and renewables and base-load power.  Ideology has played a very significant part in the statements of many politicians. This of course means that truth has often been twisted or completely ignored. 

Recently the focus has been on gas and a predicted gas shortage.

Despite the claims of the Government and many industry players, there is no general gas shortage.  There is, however, a looming domestic shortage because most of the enormous volume of gas being extracted is being exported. 

The Federal Government has rather belatedly recognised that, despite the fact that Australia will soon be the largest gas-exporting country in the world, there will be a shortage of gas for the domestic market.  Moreover, the Government has realised that domestic consumers are paying more for gas than consumers of Australian gas in Japan - even after the cost of processing and transporting of the resource to that country. This has become a rather urgent matter for the Government because domestic gas prices and the uncertainty of supply is hurting local industries.  For a government that talks about jobs and growth, permitting more of our dwindling manufacturing base going either “down the gurgler” or offshore would be politically foolish.

As the Prime Minister’s meetings in recent months with the major gas exporters have not produced the cooperation he hoped for, he recently decided to take further action.  It is action that the industry is unhappy about saying that this will discourage global investment, a claim which is unsubstantiated. There are others, including some in the Government, who believe that this interference in the market is not justified.

What happens elsewhere?  Western Australia, the one Australian state which had the forethought to realise that there was a need to protect local interests, has a gas reservation policy[1]. Many other countries, including Canada, the USA, Israel, Indonesia and Egypt, have various mechanisms to ensure that they won’t end up in the situation that Australia is heading towards.  In their rush to encourage foreign investment, successive Australian Federal Governments failed to see that safeguards to protect domestic gas supplies were needed in the national interest.

Prime Minister Turnbull has stated that his measures will only be needed for the short term because he expects that there will be further development of local gasfields which can service the domestic market. He is referring specifically to NSW and Victoria which have currently stopped unconventional gas mining. (There is an exception in NSW.  Santos’ project in the Pilliga in the north-west is currently going through the planning approval process.)

The Prime Minister is one of many politicians and industry players who have weighed in wanting the opening up of NSW and Victoria to coal seam and unconventional gas mining. 

Recently Ian Macfarlane, the head of the Queensland Resources Council, and a former federal Coalition Minister, criticised the NSW and Victorian Governments for lacking the will to develop their gas resources in the same way that Queensland has.[2] 

What Macfarlane either does not understand or conveniently ignores is that it is what happened in Queensland as well as overseas in the USA and elsewhere that alarmed communities in NSW and Victoria and generated the campaigns against CSG and unconventional gas mining – campaigns that have gathered strength also in the Northern Territory and the north-west of Western Australia. 

In his interview with Leigh Sales on ABC TV’s 7.30 on April 27 Macfarlane paints a very rosy picture of the industry in Queensland [3]. He claims “irresponsible green activism” stopped the industry in NSW.   Blaming the anti-gas campaign on the “greenie” bogey is convenient for many conservatives but is far from a true reflection of the breadth of community opposition to an invasive and polluting industry.

It will be interesting to see whether the urging of the Federal Government and proponents like Macfarlane encourage the NSW and Victorian Governments to change their positions on gas mining. If this happens, the reaction from those who see the industry as an unacceptable threat to agriculture and the environment is easy to predict.

Hildegard

Northern Rivers         

5 May 2017

[1] http://www.dsd.wa.gov.au/what-we-do/advise-on-economic-policy/domestic-gas-policy

[2] http://www.abc.net.au/7.30/content/2017/s4660142.htm

[3] Ibid.

GuestSpeak is a feature of North Coast Voices allowing Northern Rivers residents to make satirical or serious comment on issues that concern them. Posts of 250-300 words or less can be submitted to ncvguestspeak AT gmail.com.au for consideration. Longer posts will be considered on topical subjects.

GAS SHORTAGE! GAS SHORTAGE!: Why on earth do you think we would believe you now, Malcolm?

“Santos now argues that its aim in CLNG was always as much about raising the domestic gas price, and therefore re-rating large parts of the portfolio outside of GLNG, as it was about the project…….What is more, with a ~0.8% drag on Australian GDP from every $2/GJ rise in the domestic gas price, this view certainly wouldn’t have been terribly popular with politicians who approved the project.” [Credit Suisse, Asia Pacific/Australia Equity Research: Santos, 11 March 2014]

The reality for Australian householders is that on on average gas cost the same or more than electricity by 2012.

After managing to artificial inflate the domestic price of gas still further and wanting to reserve as much LNG as possible for the larger export market, now the Australian gas industry is crying shortages in order to blackmail state governments into opening up more conventional and unconventional gas fields across rural and regional Australia.

The fact of the matter is that since at least 1975 domestic energy consumption has been lower than energy production and export, while current gas domestic consumption remains significantly lower that current gas production.

According to the Australian Dept. of Industry, Innovation and Science’s Australian Energy Update 2016:

Natural gas production rose by 5 per cent in 2014–15 to 2,607 petajoules (66 billion cubic metres). Western Australia remained Australia’s largest producer of natural gas, producing nearly two-thirds of total gas production in 2014–15. Queensland production grew 45 per cent to become Australia’s second largest producer, overtaking Victoria, where production fell by 11 per cent. Production of coal seam gas increased by 50 per cent in 2014–15, to reach 462 petajoules (12 billion cubic metres), as new wells were drilled in Queensland to support the start of LNG exports from Gladstone. Coal seam gas accounted for 18 per cent of Australian gas production on an energy content basis, and nearly half of east coast gas production.

This Australia Institute graph makes the relationship between 2016 gas production and domestic consumption levels clearer:

Graph retrieved from Twitter

So why the alleged gas shortage?

The gas industry in Australia ignored signs that domestic gas consumption would rise and, in an excess of greed made commitments to export markets which appear to have been predicated on the assumption that it would be able to easily and profitably make up the competitive squeeze between domestic need, client country needs and its own commercial aims - because it would still be allowed open slather to drill or frack every available square kilometre of land with gas reserves beneath it.

This can all be explained in one sentence. The gas industry has been deliberately manipulating and starving the domestic market for years.

Mainstream media is finally looking at this problem a little more closely and explaining how businesses and consumers are being played for fools.

The Sydney Morning Herald, 16 March 2017:

Let's be clear: there is no gas shortage. Not in Australia, and not around the world. In fact, there's the opposite: a global glut of the stuff. BHP has already admitted there's enough gas in Bass Strait to supply the east coast "indefinitely". And globally, by the end of 2015 the gas industry was capable of producing about 25 per cent more liquefied gas than the world wanted to import.

By 2020, production capacity looks set to increase another 30 per cent. Even if demand is increasing – and that's not absolutely clear – it's not keeping pace with that. The world's biggest importer, Japan, has been reducing its demand for several years, and according to its own government, will be buying 30 per cent less gas by 2030 as it turns its focus to renewables….

So it was all very encouraging to hear Turnbull boasting this week about the size of his constitutional stick. "We have a responsibility – which we do not shirk from"; the industry understands the gravity of its "social licence" to operate. Et cetera. But the government has steadfastly refused to use that stick previously. And when you have gas companies slugging Australians record prices while charging their Asian customers record low prices, it's a little hard to believe they stay awake at night worrying about the terms of their "social licence".

What's much easier to believe, though, is that the gas industry is desperate to get its hands on gas supplies that are off limits – especially controversial ones like, say, coal seam gas. And if they have to offer a little more domestic supply to do it – at a time when global demand is slowing anyway – then it's hardly a sacrifice. Oh, and as it happens, that's exactly what Turnbull would like to offer them, hence his condemnation of the states' bans on further gas extraction.

It's a neat trick, really. Take a country with enough gas to supply itself "indefinitely", send the vast majority of it overseas, refuse to sell locally at a fair price, create a domestic shortage, then demand access to some of our most environmentally sensitive resources as though it's an emergency measure.

The Australian, 18 March 2017:

According to a report compiled by Energy Edge, the $US18.5 billion ($24.1bn) Gladstone LNG project, run by Santos, has at times been buying the equivalent of up to half of the whole east coast’s energy demand to meet a shortfall of gas to put through its two LNG production trains.

It is little wonder then that high up in the gentlemen’s agreement struck on Wednesday were commitments to supply, rather than deplete, domestic gas markets.

It is also clear that only two of the three Gladstone projects could agree to being net domestic gas contributors “as part of their social licence”.

The GLNG project has had to “take the matter on notice”, the agreement said.

The other two LNG projects — Queensland Curtis LNG run by Shell and Australia Pacific LNG run by Origin Energy and ConocoPhillips — have been consistently providing gas to the market (and GLNG, sometimes) on top of their export commitments.

“QCLNG and APLNG are currently either net long or balanced to the market, whereas GLNG is significantly short on equity supplies and must rely on third-party contracts,” Energy Edge said.

That was known by most observers.

But, using a range of public sources, Energy Edge says GLNG has sometimes bought a staggering 500-600 terajoules a day of gas on top of its own production.

Illustrating how substantial that volume is, the combined domestic demand from the pipeline-connected eastern states of Queensland, NSW, Victoria and Tasmania is about 1250 terajoules a day.

GLNG appears to already be averaging the use of about 300-400 terajoules a day of third-party gas — that is, gas outside the coal-seam gasfields it has developed specifically to feed its LNG project — for its LNG export.

With APLNG and QCLNG ­already fulfilling the demand, any short-term change will need to come from Santos and its GLNG partners Total and Kogas, although it might pay the rest of the industry to somehow provide some assistance.

After the meeting, Santos chief executive Kevin Gallagher, who was brought in last year to fix the problems, would not comment on exactly what the GLNG response could be.

“As an Australian company that has supplied the domestic market since its inception, we look forward to working with and supporting the government on this issue,” Mr Gallagher said.

“We are committed to working across all of our joint ventures to free up gas as well as continue to identify and develop new resources for the domestic market.”

As recently as December, at the company’s investor day, Mr Gallagher said the aim was to ramp up GLNG volumes to fill 6 million tonnes of the plant’s 7.8 million tonnes of annual LNG export capacity.

This could be potentially expanded by offering tolling services to other Australian gas producers who might want to export their gas but didn’t have the facilities, he said.

Enthusiasm for toll-treating has probably eased off in the wake of the meeting with Mr Turnbull and the current alarm around contract prices that Australian Competition & Consumer Commission chairman Rod Sims said this week “are apparently being offered at $20 a gigajoule, if they receive supply offers at all”.

East coast gas contract prices were $3 to $4 per gigajoule before the export plants were committed to and are said to now average $8 to $10, except in extreme cases.

The $70bn worth of Gladstone gas freezers and associated coal-seam gas wells have rapidly tripled east coast gas demand and opened the market up to international buyers.

This has ended an era of cheap Australian domestic gas supply, although the industry says this would have happened anyway because the cost of developing required resources was rising.

But the expected price hike has been exacerbated and come with shortages thanks to external factors and industry and government missteps, many of them flagged by observers before they were committed to.

Despite calls for industry to collaborate, three separate, almost identical plants were approved by Queensland and federal governments and, from 2010, built by the gas industry on Curtis Island.

This resulted in increased capital costs because infrastructure was not shared, cost blowouts as the remote construction market heated up and the building of six LNG production trains when the associated coal-seam gasfields could only really supply enough fuel for five.

To achieve efficiencies of scale, GLNG built two trains when it only had enough gas to comfortably fill one, admitting it would need to buy an unspecified amount of third-party gas to fill the second train.

After this, much that could go wrong has gone wrong.

Oil prices crashed, robbing gas developers of cash flow and investor funds that would have been used for extra LNG-related and domestic gas development, while community opposition to onshore gas production grew, resulting in bans or restrictions on new development in NSW, Victoria and now the Northern Territory.

At the same time, coal-seam gas resources did not perform as well as hoped at some Santos GLNG grounds, Santos’s Narrabri project in NSW (which was also hit by community opposition) and at the Bowen Basin ground of the Arrow joint venture between Shell and PetroChina.

It is not clear what the options are for GLNG, but Credit Suisse analyst Mark Samter has made repeated calls for it to close down one of its two trains — something Mr Gallagher ruled out last year.

Now an incredibly rich Liberal Party politician heading a Liberal-Nationals federal government – who was a failure as Minister for the Environment and Water, an abject failure as Minister for Communications and is a profound disappointment as Prime Minister of Australia – expects voters to believe that there is a genuine gas supply emergency which will leave local families and businesses going without unless the states allow indiscriminate gas mining.

National Farmers' Federation calls for market-based mechanism to secure clean and affordable energy, such as an emissions intensity scheme

I’ve grown old waiting for Liberal and Nationals members of parliament to turn and squarely face the reality of global warming and climate change.

I suspect that I will be long dead before they actually do.

Once more the call went out to government………

The Guardian, 7 March 2017:

The National Farmers’ Federation has called for a market-based mechanism to secure clean and affordable energy, such as an emissions intensity scheme, joining a long list of organisations urging an end to Australia’s policy impasse.

In a submission to the Finkel review, the NFF calls for the government to reconsider its opposition to an EIS and institute a market-based mechanism by 2020 because it would be the cheapest path to low-emissions power generation.

The NFF joins many organisations calling for consideration of a market mechanism including network company Energy Networks Australia, retailer Energy Australia, electricity provider AGL, the Climate Change Authority, the Business Council of Australia and the CSIRO.

The chief scientist, Alan Finkel, has also given implicit support for an emissions intensity scheme, saying it would integrate best “with the electricity market’s pricing and risk management framework” and “had the lowest economic costs and the lowest impact on electricity prices”.

In December the energy and environment minister, Josh Frydenberg, ruled out pursuing an EIS, pre-empting the findings of the Finkel report by taking one of the most widely supported policies to meet Paris climate targets off the table.

On Tuesday the NFF president, Fiona Simson, told ABC’s AM the current system was “broken”, citing blackouts in South Australia and poor energy reliability and affordability in the agricultural sector.

Simson said some farmers faced power bills of double or triple the rates in previous years, labelling price spikes “indefensible”.

“In agriculture it’s absolutely devastating – we have businesses that rely on secure, reliable and affordable electricity to conduct cool stores that store fruit, for example, that run their milking machines for their cows, that run irrigation pumps for their fruit and their vegetables.”

Simson said that an evidence-based policy would result in “the market sorting it out” and called for a technology neutral approach.

An emissions intensity scheme is part of Labor’s climate change policy and has been backed by the South Australian government, which the Coalition has used to revive a scare campaign about power prices despite findings that policy stability can reduce prices…..

Finkel is expected present his final report to the Council of Australian Governments by mid year.

Are we witnessing the beginning of the end for the global coal industry?

While the Australian Coalition Government keep its head deeply buried in the sand on climate change policy and the future of fossil fuels the world has quietly begun to by-pass coal, one of this country’s biggest exports.

Senate Bill 1547 (ELIMINATION OF COAL FROM ELECTRICITY SUPPLY) passed the Oregon House of Representatives on a 39-20 bipartisan vote on 16 February 2016 and re-passed the Senate on 2 March 2016:

BILL SUMMARY

“Requires each electric company providing electricity to retail electricity consumers located in this state to eliminate coal-fired resources from electric company's electricity supply. 

Clarifies that term "public utility" does not include people's utility district or electric cooperative for purpose of being regulated by Public Utility Commission. Allows Public Utility Commission to consider net gain or loss of sale of coal-fired resources for certain allocations to retail electricity consumers. Modifies qualifying electricity for purposes of renewable portfolio standards. Changes compliance requirements for renewable portfolio standards. Makes other changes to provisions setting forth renewable portfolio standards. Permits carry forward of certain renewable energy certificates for specified periods. Provides rules on application of renewable portfolio standards when electric utilities acquire service territory. Permits commission to approve cost recovery for costs related to renewable energy storage. Provides process to address conflicts between requirements for electric company to comply with renewable portfolio standards and reliability standards of North American Electric Reliability Corporation. Changes goal to acquire electricity from community-based renewable energy projects to requirement to acquire such electricity. Expands sources that qualify for community-based renewable energy projects to include facilities that generate electricity using biomass and that also generate thermal energy for secondary purpose. Directs commission to establish stranded cost obligation associated with condemnation of or transaction related to service territory or property of electric company. Requires public utilities to annually forecast projected state and federal production tax credits received due to variable renewable electricity production. Clarifies that term "public utility" does not include people's utility district or electric cooperative for purposes of being regulated by Public Utility Commission. Requires each electric company to file applications with commission for programs to accelerate transportation electrification. Allows return of and return on investment made by electric company for purposes of program. Directs commission to establish program for creation of community solar projects. Repeals minimum solar energy capacity standard for electric companies. Declares emergency, effective on passage.”

The Guardian, 4 March 2016:

Oregon has become the first US state to pass laws to rid itself of coal, committing to eliminate the use of coal-fired power by 2035 and to double the amount of renewable energy in the state by 2040.

Legislation passed by the state’s assembly, which will need to be signed into law by Governor Kate Brown, will transition Oregon away from coal, which currently provides around a third of the state’s electricity supply.

At the same time, the state will also require its two largest utilities to increase their share of clean energy, such as solar and wind, to 50% by 2040. Combined with Oregon’s current hydroelectric output, the state will be overwhelmingly powered by low-carbon alternatives to fossil fuels.

Climate campaigners said the legislation was a landmark moment and showed that the US was moving rapidly towards renewables, despite the temporary block placed by the supreme court on the Obama administration’s clean power plan…..

In December 2015 the Ontario Ministry of Energy in Canada announced The End Of Coal:

Coal went from 25% of Ontario’s supply mix in 2003 to zero in 2014, all while grid reliability and domestic supply improved. The elimination of coal stands as the single largest GHG emissions reduction action on the continent and was primarily responsible for Ontario achieving its ambitious 2014 emissions reduction target of 6% below 1990 levels.

The elimination of coal-fired electricity was a shared effort between the Ontario Ministry of Energy and two of its agencies:

* Ontario Power Generation (OPG), the largest generator of electricity in the province, primarily through hydroelectric and nuclear sites.

* The Independent Electricity System Operator (IESO), whose duties include both procuring electricity supply and planning the electricity system over the long-term…..

Today….Ontario has more than 14,800 MW of wind, solar, bioenergy, and hydroelectric energy online, and almost 3,000 MW of renewable energy projects contracted and under development. 20,000 MW of renewable energy will be online by 2025, representing about half of Ontario’s installed capacity…..

Post-carbon tax repeal and household electricity is just as unaffordable for 1 in 8 Australians

In October 2014 Ernest & Young released its annual survey in the Customer Experience – Utilities series.

This survey explored the perceptions and experiences of over 649 electricity retail customers across regional and metro markets in Victoria, New South Wales and Queensland.

When it looked at  energy affordability the survey found:

* Over the last 12 months, 22% of Australians paid their electricity bill late;

* One in eight Australians missed an electricity payment because they couldn’t afford it;

* The most common reason for not paying on time was due to an inability to afford the payment (60%);

* This was significantly more likely to be those located in regional areas (78% vs. 49% in metropolitan areas); and

* A common reason for an existing customer exploring a change in energy supplier is a high power bill, but 20% of potential switchers are not making the change because ‘it’s too difficult’.

A compilation of the survey report graphics illustrating energy stress was published by ABC News on 13 October 2014:

The Energy & Water Ombudsman NSW (EWON) 2013-14 annual report media release stated:

Affordability problems were also reflected in a 32% increase in complaints arising from completed disconnections. “This picture of strained consumer circumstances is consistent with both the increased number of complaints we received from customers who were denied payment plans, and very high rates of disconnection in NSW generally”.

The Ombudsman also reported a 28% increase in affordability related complaints in 2013-14.

No wonder Prime Minister Abbott has gone quiet on the subject of affordable electricity bills and won’t be waving any in front of assembled MPs or media cameras any time soon.

Abbott Government releases its 2014 Energy Green Paper - prepare to be underwhelmed

The Abbott Government released its Energy Green Paper on 23 September 2014.

The document sketchily mentions renewable energy or forms of renewable energy a total of 134 times within its 92 pages, while mentioning conventional gas/unconventional gas a total of 434 times, coal 100 times and exports 131 times.

Readers who care about Australia's sustainable energy future move onto the body this paper at their own risk.......

Australian Government Energy Green Paper September 2014