The South Australia state government is beside itself with fury. Having been left out on a limb once again by the actions, or inaction, of the Australian Energy Market Operator, it is threatening a “major intervention” into the energy markets.
Just what this might entail, who knows. “It will be dramatic,” promised premier Jay Weatherill, who refused to rule out “nationalising” the system.
Not sure what that means but it could mean assuming the right to instruct generators to go on-line, rather than sitting idle as thousands of consumers and businesses have their power switched off in rolling blackouts.
If such a thing did occur, then the private players in Australia’s energy markets only have themselves to blame. Time after time they have proved greedy, manipulating prices to maximise profits, and then fighting any rule changes that might see a more efficient, cheaper, cleaner and smarter grid.
“We are seeing the electricity industry commit an own goal here,” says Tristan Edis, an energy markets expert with Green Energy Markets.
“The Energy Supply Council started the process of politicising energy supply security back in October 2015 through their misleading PR campaign promoting fear of South Australia as an “accidental experiment” in too much renewable energy.
“The goal was to defend existing generators’ profits from policies that would promote zero emission renewable energy consistent with the Paris Climate Accord.
“But the campaign took on a life of its own in the hands of the media. The end result of their campaign is panicked and opportunistic politicians from both sides talking about ‘dramatically intervening’ in the market and forcing the construction of great big new coal generators.
“These pose potentially bigger and highly unpredictable threats to electricity businesses and the investment environment than policies that sought to steadily decarbonise electricity supply,” Edis said.
The most disappointing aspect of the current energy debate has been the politics in Canberra. The Coalition has launched a campaign of half-truths and outright lies to demonise renewables, and even brought a lump of coal into Question Time on Thursday to support its attacks on wind energy.
On the other side, Labor has shown itself to be stunningly incompetent in holding them to account – even with the reports from the CSIRO and Alan Finkel at hand.
Indeed, there is fear now that even though Finkel understands what’s going on, and seems determined to speak his mind, that his report will be marginalised in the same way the work of Professor Ross Garnaut was a few years ago.
It is instructive that the Coalition – for reasons known best to themselves, or their fossil fuel backers – have chosen to focus on Finkel’s reference to ultra-critical coal-fired power stations. Yet Finkel spent no more time on USC than he did on wave energy or solar thermal.
The Coalition already has taken his report completely out of context, and ignored his observations that the technology to deal with a grid with high renewables is readily available. But as Edis points out, this has been abetted and encouraged by the incumbent industry.
“Instead of attacking and demonising renewable energy via the media, the industry would have been better served working cooperatively with state governments and also the federal government to iron out the bugs of decarbonisation policies that were on the table,” Edis notes.
But this is a problem across the energy industry. The generators are using their market power – hooray says the regulatory chief, Rod Sims of the ACCC – to extract maximum profits.
The networks, both private and government-owned, have been doing that for years, which is why Australian consumers have the highest electricity prices in the world. And the retailers, as we will reveal on Friday, have been similarly exploitative.
The rule makers and the regulators have done pretty much nothing. They have allowed an opaque and obscure market to take hold, have been slow on reform, refused rule changes, and been lax on regulation and punishment.
On Wednesday, RenewEconomy highlighted how actions by Origin Energy and Snowy Hydro had deliberately forced out competitors from the market so that higher prices could be achieved. Apparently, this is also perfectly legal.
And when generators do get caught doing something wrong, they get barely a slap on the wrist. The AER last year imposed fines on two companies for disobeying market rules. The fines didn’t even cover the excess profits made from their misbehaviour. Not so much a penalty, then, as a profit share arrangement.
The CSIRO and the energy network owners were right, last year, to warn of mass defections from the grid. Consumers have had enough. They have, or will soon have, the technology available to look after their own needs and will be able to tell the big utilities to get stuffed. And they will be perfectly justified in doing so.
Giles Parkinson is a journalist of 30 years experience, a former Business Editor and Deputy Editor of the Financial Review, a columnist for The Bulletin magazine and The Australian, and the former editor of Climate Spectator.