The Federal Election for 2019 is done and dusted, and while we don’t yet have all the answers on the form the Federal Government will take, we do know that the Liberal National Coalition, led by Scott Morrison, will be forming government. We take a closer look at the energy policy the coalition took to the election, and what this will mean for the energy industry.
The policy the Liberal party campaigned on, and had been campaigning on since Scott Morrison became PM and Angus Taylor took over the energy portfolio, was centred around lower power prices for consumers.
The three mechanisms the Coalition intended to use to enact this were:
- A price safety net to protect customers
- “Big stick” legislation to stop energy companies ripping off customers
- A technology neutral program to underwrite new reliable energy generation (the Underwriting New Generation Investments program)
While the big stick legislation was ultimately canned, after widespread industry criticism and concern it could actually raise power prices, the price safety net and Underwriting New Generation Investments (UNGI) program have both already moved forward.
Price safety net
At the end of April, the Australian Energy Regulator (AER) issued its final determination on Default Market Offer (DMO) prices based on recommendations made by the Australian Competition and Consumers Commission (ACCC).
According to the AER, the final decision will deliver annual reductions from the standard standing offer bill for residential customers of approximately:
Between $129 and $181 for New South Wales (depending on distribution zone)
$118 for South-Eastern Queensland
$171 for South Australia
It will also reduce prices for small business customers who are on standing offers. For small business customers, annual reductions from the standard standing offer bill will be approximately:
Between $579 and $878 for New South Wales (depending on distribution zone)
$457 for South-Eastern Queensland
$896 for South Australia
According to AER Chair, Paula Conboy, standing offers are no longer working as they were intended, therefore the DMO will bring down bills for most people on those offers. The DMO will also be used as a reference bill from which all discounts must be calculated.
“Working with our ACCC colleagues, we will monitor the impact of DMO prices, especially changes retailers make to their standing and market offer prices. This work will inform future DMO decisions,” said AER Chair, Paula Conboy.
But Australian Energy Council (AEC) Chief Executive, Sarah McNamara, argued that the DMO will be of limited benefit to just 14 per cent of customers in South Australia, NSW and south-east Queensland.
According to Ms McNamara, the DMO simply highlights the fact that competitive market offers remain a better option for households and businesses.
“Significantly, for the 86 per cent of customers who are already on a cheaper market deal, this announcement will not lower prices.
“For those currently on an unregulated standing offer who will move to a DMO, the AER has confirmed that savings for residential customers will range from $118-$181 across the three jurisdictions. Larger savings are available for small businesses.
“But the main point is that every one of those customers would be better off on a cheaper market deal.
“Any customer who remains on the default price, regulated or not, will be paying more than they need to.”
Ms McNamara noted that the AER had acknowledged the importance of maintaining competition by including an allowance for price headroom in its final determination.
“The approach taken by the AER does give the retail market the best chance of continuing to deliver competition and, with it, cheap market deals for consumers.”
At the end of March, Energy Minister, Angus Taylor, announced the twelve projects which were shortlisted as part of the UNGI program.
From 66 proposals, the Government – adhering to a policy of technology neutrality – agreed to a shortlist of 12 projects – six renewable pumped hydro projects, five gas projects and one coal upgrade project.
According to the Government, the inclusion of six hydro projects tied in well with it’s recent announcements regarding Snowy 2.0; and the five gas projects signalled the Coalition’s focus on gas as a transition fuel as Australia move towards a more renewables-focused energy market.
The twelve shortlisted projects are:
- Alinta Energy, Gas, East Gippsland, Victoria
- Alinta Energy, Gas, Reeves Plains, South Australia
- Quinbrook Infrastructure Partners, Gas, Gatton, Queensland
- APA Group, Gas, Dandenong, Victoria
- Australian Industrial Energy, Gas, Port Kembla, NSW
- Sunset Power and Delta Electricity, Renewable Pumped Hydro, Lincoln Gap, South Australia
- Rise Renewables, Renewable Pumped Hydro, Baroota, South Australia
- UPC Renewables, Renewable Pumped Hydro, Armidale, NSW
- BE Power Solutions, Renewable Pumped Hydro, Cressbrook Reservoir Crows Nest, Queensland
- Hydro Tasmania: Battery of the Nation, Renewable Pumped Hydro, Tasmania
- SIMEC Zen Energy, Renewable Pumped Hydro, Eyre Peninsula, South Australia
- Delta, Coal Upgrade, Lake Macquarie, NSW
There has been some opposition to the inclusion of a coal upgrade project in the mix, in particular from the Clean Energy Council, with Chief Executive, Kane Thornton, stating that the inclusion of the project “would spook private investors in new clean energy generation”.
“Government funding for extending the life of existing coal is at odds with the original recommendation of the Australian Competition and Consumer Commission (ACCC) and simply serves to spook private investors who have backed renewable energy and storage technology to the tune of more than $20 billion over the last year alone,” Mr Thornton said.
Mr Thornton also stated that “the UNGI program is rushed and lacking in transparency,” and believes the Federal Government should instead “focus on long-term market-based energy policy to provide investment confidence and a shift from the current trend of picking winners and distorting the energy market.”
Additional policy measures
Outside of the two key focus areas, during the election campaign the Liberal Party announced a range of additional initiatives which will impact the energy industry:
- Investing $1.38 billion in Snowy 2.0 to support new renewable energy for Australia’s future energy mix to deliver affordable, reliable power.
- $56 million for Tasmania’s Marinus Link project – the second interconnector between Tasmania and the mainland. Combined with the Battery of the Nation, these projects will help cut power prices and maintain the reliability of the National Electricity Market, create up to 3800 direct and indirect jobs during construction and deliver an economic stimulus of up to $7 billion.
- $284.4 million for Energy Assistance Payments to age and disability support pensioners, recipients of Carer Payment and Parenting Payment Single, and veterans and their dependants receiving eligible payments from the Department of Veterans’ Affairs to help with energy bills – $75 for singles and $125 for couples.
- $79.2 million over six years for energy efficiency standards and programs to reduce costs for businesses, community groups and households.
- $50.4 million to support feasibility studies for microgrids in remote and regional areas, including off-grid and ‘edge of electricity grid’ areas where local distributed generation and demand management is used to ensure supply.
- $3.2 million to establish a Priority Transmission Taskforce which will speed up delivery of transmission projects identified in the Australian Energy Market Operator’s 20-year Integrated System Plan.
Where to now?
The AEC has extended its congratulations to the Morrison Government on its re-election, with Ms McNamara stating that the next term will provide an opportunity for the industry to work with the government to deliver better results for households and businesses.
“We acknowledge and thank Minister Angus Taylor for his work in the last term and we look forward to a continued relationship with the Morrison Government for the benefit of all energy customers,” said Ms McNamara.
APPEA Chief Executive Andrew McConville also congratulated the Coalition on its election success, and said it suggested the Australian community wanted a stable and balanced approach to the political and policy challenges facing the nation.
“APPEA urges a clear focus on stable energy and climate policy that enables Australians to enjoy the benefits of our abundant natural resources and manage the transition to a lower carbon economy,” Mr McConville said.
“In doing so, we must not forget the critical role natural resources play in underpinning our economic well-being and that hundreds of thousands of Australian jobs rely on a reliable, affordable gas supply.”
The approach of the Morrison Government can perhaps be best summed up in this simple statement from their own energy policy announcement:
“We will put downward pressure on domestic gas prices while ensuring the security of supply remains a priority…and our strong fiscal and economic management will allow us to invest in initiatives to reduce our emissions and meet our international commitments, without wrecking the economy and driving power prices up.”
With that statement, combined with the backing away from the “big stick” legislation threats, the Morrison Government is indicating that it will be taking a customer-centric, more moderate approach to the energy industry and its big players for the next term of government.
How it all plays out from here remains to be seen, but the UNGI program, and its emphasis on new projects which will help to deliver more energy while reducing emissions, is a positive sign for the industry.