Green Paper 2014 looks to reset industry policy

The long-awaited energy green paper from the Abbott Government is now on the table and, as expected, it focuses on energy prices and domestic gas supply. Federal Industry Minister Ian Macfarlane said it’s a step towards Australia becoming an “energy superpower” – but what does industry think?

Acknowledging there is no ‘silver bullet’ to achieving the change needed in the energy sector, the report is quick to suggest industry and consumer confidence will come if coherent, properly integrated policies are achieved.

Green Paper 2014 – an interim document released ahead of the finalisation of a white paper on energy – includes market reforms designed to attract energy resources investment, stabilise energy price rises and prepare for the nation’s future energy security.

It’s built around four key themes; attracting investment, putting downward pressure on electricity price rises; gas supply and market development; and future energy supply, namely securing reliable and affordable energy in a technology neutral way that could also help to lower emissions.

“Privatisation and greater competition are needed to drive the innovation and productivity that leads to better products and services for consumers,” the paper noted, while calling for price reform so households and businesses can take more control over the way they use electricity.

Speaking at the International Mining and Resources Conference in November, Mr Macfarlane said the blueprint would allow Australia to take full advantage of its natural strengths and consolidate its position as an energy superpower.

“The government is resetting industry policy in Australia to build on our areas of competitive strength. The energy sector is one of those strengths and the paper will identify the ways in which we can improve the framework surrounding our energy assets,” he said.

“Australia has an abundance of energy resources and energy assets. We are well regarded internationally for our diverse range of energy sources and we are supplying increasing volumes of energy commodities to energy-hungry nations in the Asian region.”

The paper noted Australia’s gas markets are changing with the east coast market – which until now has only been a domestic market – preparing to export LNG.

“Supply now needs to meet domestic and international demand, and domestic prices naturally will start to match higher international prices. This export industry provides an enormous opportunity for the nation’s economy,” the paper said, acknowledging regulatory barriers to unconventional gas resources in some states are creating “potential near-term supply shortages”.

“There is also an opportunity to improve transparency and competition by further developing the emerging gas trading markets. Governments and industry can work together on innovative strategies for better gas market function. An example is the Wallumbilla Gas Supply Hub in Queensland that provides for more open gas trade,” the report added.

The paper also acknowledged the importance of international collaboration in allowing Australian industries to benefit from international experience in developing energy technologies, such as HELE coal generation, renewable energy, small modular reactors and energy storage.

Submissions to Green Paper 2014 closed on November 4 and will inform the development of the Energy White Paper outlining the government’s long-term energy policy.

Paving the way for tariff reform: ENA

The Energy Networks Association (ENA) has welcomed the federal government’s renewed commitment to energy reform, saying the paper’s focus on electricity pricing reform will be essential to ensuring fairness and enabling the grid to accommodate major changes in use.

“Current tariff structures also result in unfair cross subsidies between users, with the Australian Energy Market Commission recently identifying subsidies from most electricity customers of up to $700 per year to some air-conditioning consumers and $120 per year to some solar customers,” ENA chief executive officer John Bradley said.

Mr Bradley said ENA looks forward further progress on a co-ordinated pricing reform agenda in the lead up to the next COAG Energy Council meeting in December.

“The green paper rightly recognises the efficient use of smart meters will be critical to tariff reform and the long-term efficiency of Australia’s electricity system,” Mr Bradley said.

“Further work is required to ensure a metering framework that delivers benefits not only to individual consumers but to all consumers who depend on efficient, reliable and safe network services.”

The association has also publically welcomed the green paper’s recommendation that action on a national framework for distribution and transmission reliability should be accelerated.

“Australian energy networks support reliability investments that achieve the performance and security that customers value, and greater engagement of customers in the planning process,” Mr Bradley said.

With the sector facing the internationalisation of wholesale prices, Mr Bradley also said ENA supported the paper’s recommendation for further analysis of gas markets in Australia, and highlighted the importance of operational transparency, good information access and community engagement.

“It is critical governments also consider the impact other energy policies have on competitiveness in Australia’s domestic gas sector including the distortionary impact of the small-scale renewable energy scheme on hot water appliance markets in Australia,” he said.

Decline in natural advantage will be addressed through robust policy: EUAA

The industry body for Australia’s energy manufacturers, retailers and resource-based industries is pleased to see the federal government discuss decreasing price pressures as a priority, along with improving national energy markets.

Energy Users Association Australia (EUAA) chief executive officer Phil Barresi said energy users and the energy industry have long heralded the need for an affordable, reliable gas supply that balances the needs of a stressed domestic market with a “rampaging” export industry.

“For too long, energy users have been hindered by convoluted, complex energy policy. We need certainty in the way forward on a range of issues, including restoring energy competitiveness,” Mr Barresi said.

“Despite the welcome removal of the carbon tax, energy users still face rising electricity prices in a shrinking demand market. The historical advantage of abundant cheap energy supply for the domestic industry is slowly disappearing.

“The energy green paper gives hope to the domestic manufacturing and industrial sector that any decline in our natural advantage will be addressed through the implementation of a robust, equitable policy.”

EUAA has said a national approach will offer a streamlined energy market, with Mr Barresi saying the body has long called for the benefits of privatisation to be heeded.

“It’s gratifying this call has been considered in the paper. Thanks to ill-informed policy, privatisation of state generation and network assets has seen our members in New South Wales and Queensland face network price increases vastly out of kilter with energy users in Victoria,” Mr Barresi said.

A national approach will break down the red tape: ERAA

The Energy Retailers Association of Australia (ERAA) has welcomed Green Paper 2014’s support for a number of energy policy reforms, including proposals to streamline the energy market towards a more national approach.

ERAA chief executive Cameron O’Reilly said a national energy market that includes Western Australia and the Northern Territory would create a consistent framework for all consumers.

“It will harmonise state-based regulatory frameworks, remove unnecessary duplication and break down the bureaucratic red tape,” Mr O’Reilly said.

“The ERAA has long held the view an integrated approach to regulation will promote more efficient retail energy markets and that regulation is only introduced to address market failures.”

Mr O’Reilly said the energy green paper also recommended reforms to further deregulate prices in the retail gas and electricity market, a move the ERAA supports.

“Putting in place retail price monitoring in place of regulation will promote greater competition in retail markets and ultimately, the consumer wins,” he said.

“The ERAA encourages other regulatory changes outlined in the green paper including the amendments to the clean energy agenda and introducing new technologies to empower consumers and promote energy efficiency.

“The most effective way to manage challenges facing the Australian energy market – which includes recent network price increases, advanced metering and green schemes – is to harmonise regulatory frameworks and cut through red-tape,” Mr O’Reilly said.

Power investment left up in the air: Grattan Institute

Independent think tank the Grattan Institute has said the green energy paper shows how hard it is for the federal government to deliver on its pre-election promise of coherent and consistent energy policy to protect jobs and investment.

“The green paper does cover the issues facing Australia’s energy sector. It is convincing and comprehensive on the gas market and workmanlike on the electricity market. But it frankly goes missing in providing credible direction on climate change policy beyond 2020,” the institute said.

“This issue, as much as any, will inform the critical investment decisions that will determine the future reliability and affordability of our energy supply.”

As expected, the paper urges completion of the sale of state- and territory-owned electricity assets, with the institute saying,” the end of this 20-year reform journey is in sight and consumers will be the winners”.

“The COAG Energy Council must actively drive these two initiatives.

“While the Australian Energy Market Commission and the Australian Energy Regulator have roles in setting and policing the market rules, governments must not abrogate responsibility. It would be good to see this outcome-based commitment more strongly reflected in the energy white paper.”

The Grattan Institute also said it is disappointing the paper raises some of the key challenges in the national electricity market but provides no clarity on how governments should move forwards.

“We should be taking actions now to avoid getting into the same difficulties of stressed balance sheets and wary investors that some European electricity markets are already experiencing,” the institute said.

“The green paper takes a 20-year view on the challenges and risks for Australian electricity networks, but a six-year view on generation, where action on climate change has been, and remains, a central issue.

“This position represents a major threat to efficient investment and creates unmanageable risks for investors. Australia’s energy strategy will be incomplete until this gap is addressed.”

“Open for business” message is good for oil and gas industry: APPEA

The energy green paper highlights some of the reforms needed to enhance Australia’s international competitiveness and improve the oil and gas industry’s ability to supply both domestic and export markets, according to the peak body representing the country’s oil and gas industry.

An improved energy policy framework, including a reform of Australia’s labour markets, would remove unnecessary barriers to continued investment in exploration and production and enable the industry to increase domestic gas supplies, according to the Australian Petroleum Production & Exploration Association (APPEA).

APPEA chief executive David Byers said it’s critical the government’s final white paper ensures Australia’s oil and gas companies are not disadvantaged against international competitors or against producers of other energy sources in Australia.

“Australia has more than enough natural gas to service both domestic and export markets for decades and this puts Australia in an enviable position to maintain long-term energy security. Therefore, the paper’s message that Australia must be seen to be open for business – with a stable and predictable policy environment and appropriate taxes and regulation – is a positive one.

“A high-cost local environment and the emergence of new LNG competitors in East Africa and North America are major challenges to LNG industry growth.

“A policy of domestic reservation would not bring on new supplies for manufacturers or other users and the green paper correctly notes increasing gas supply is the best way to ease gas market pressures.”

Renewables critical to achieving energy green paper goals: CEC

Inclusion of renewables in a diverse future energy landscape has been welcomed by the country’s clean energy companies.

“Our system for generating and delivering energy is undergoing a huge transformation that presents both challenges and opportunities, and it is encouraging to see the energy green paper acknowledging some of these,” Clean Energy Council acting chief executive Kane Thornton said.

“The Renewable Energy Target has already played a significant role in transitioning Australia’s energy sector from one that is dominated by a few fossil fuel generators to one that is decentralised, efficient and clean. But to fully realise this, we now need to consider other factors, including the orderly retirement of coal-fired power stations that are at the end of their lives.”

Mr Thornton also acknowledged more thought is required on how to remove market barriers to clean energy technologies and on how to support innovation.

“But this isn’t going to happen without co-ordinated leadership from governments. And it will be unachievable if the government chooses to accept the recommendations of the Warburton review to slash the RET,” he said.

Draft energy policy has short-term focus: science community

A leading group of scientists and engineers has hit out at the Abbott government’s burgeoning energy policy, saying it fails to recognise Australia may find itself “out of step” with international action on climate change.

The criticisms were detailed in the Australian Academy of Technological Sciences and Engineering (ATSE) submission to the energy green paper, which criticised the draft policy for a “short-term focus” and an “acceptance of fossil fuel reliance”, as reported by APN.

The science body also said the draft fell short on supporting investment for long-term action on climate change.

While the group recognised the continued need to rely on fossil fuels, it argued the paper failed to recognise or plan for “the real geopolitical and economic risks of Australia finding itself to be out of step with international thinking around greenhouse gas emissions”.

It argued the plan could further leave the nation “exposed to possible future international moves to limit and price carbon emissions”.

The submission came a day after the US and China reached a landmark deal to further reduce both nations’ emissions, which the academy said puts further weight behind its submission.