Bad policy on gas cannot seep into power too

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The worst news is that all the things which might now improve matters further, or buffer Australia from new global gas pricing pressures, are in the hands of our political system.

The “most material pricing benefits to users”, says the ACCC, will only come if more lower cost production is sourced in the southern states of NSW, Victoria, and South Australia. That could shave off another $2 to $4 a gigajoule in the cost of pipelining from Queensland, and some extra. This would be partly down to geology: finding and developing more gas in South Australia and offshore Victoria, which cannot be done overnight. But it is also down to politics.

NSW is full of marketable gas which will remain in the ground for the foreseeable future. That’s courtesy of a Coalition state government in thrall to shock jock Alan Jones and activist claims based on voodoo science, discounted by the state’s own chief scientist. In Victoria, a green-tinged Labor government could now find their allies in GetUp! turning upon them with a rent-a-mob campaign for just backing the modest and sensible National Energy Guarantee at COAG next Friday. It’s therefore hard to see the state reversing its moratorium on onshore gas development as well. The ACCC of course doesn’t talk politics, but it warns state governments bluntly that they must learn “to manage the risks of individual gas projects, rather than implementing blanket moratoria and regulatory restrictions”.

Efforts made since 2017 mean that another price shock which spikes so far above world prices is now less likely. The Queensland exporters are supplying domestic gas, and without Canberra applying its draconian socialist export controls. The Northern Territory has ended a fracking ban as new pipeline capacity comes on stream. Then there is the chance of rebooting production from declining traditional sources like offshore Victoria, and South Australia.

But even now the outlook is very finely balanced. The ACCC’s forecast for plenty of gas in 2019 is based on Australian Energy Market Operator’s optimistic view that we won’t need as much gas for power generation then. But it wouldn’t take much for that to change, and is the reason why many in the industry also support the four proposals to import LNG to Australia as well.

Next week, state governments must decide whether to back the NEG, which should rekindle energy sector investment. And after the mismanagement of the gas sector, electricity cannot become an even larger field of energy policy decided on the political fringes.

Some federal Coalition backbenchers are mounting a last ditch attempt to derail the NEG. The plan attempts to balance incentives for lower price, high reliability, and lower emissions. Conservative modelling by the Energy Security Board shows that coal will at 60 per cent still be the biggest single power source in 2030 – even as renewables grow to one third of the mix. The ESB says the NEG will not deliver big new coal-fired power stations, but that is partly down to the high cost of building anything in Australia compared to China or India. Labor should back the NEG, because it is in essence the type of trade-off they have supported before. If Labor does not, it leaves the scheme vulnerable to former prime minister Tony Abbott’s threats to cross the floor when new emissions targets to support the NEG have to be voted. But that would also make the Coalition’s pro-coal lobby the equivalent of the anti-gas zealots. That is something for them to consider carefully: destroying the last sane option left standing after a decade of energy policy madness is some responsibility to take.

Source

https://www.afr.com/opinion/editorials/bad-policy-on-gas-cannot-seep-into-power-too-20180802-h13hih

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