Energy White Paper promises privatisation and lower prices: experts respond

The federal government has released its Energy White Paper, which sets out policies for electricity generation, transport, and the energy resources sector.

The document, and its accompanying summary, calls for:

• increased competition to keep energy prices down, with an end to electricity subsidies and more privatisation of poles and wires; and the lifting of state policies that impede unconventional gas production;

• an increase of up to 40% in energy productivity (the ratio of economic output to energy consumption) by 2030;

• a “technology neutral” approach to developing future energy sources for electricity and transport.

Below, experts respond to the policies:

Poles, wires… and panels

University of Sydney senior lecturer Lynne Chester said rhetoric supporting privatisation was not backed by conclusive evidence.

She also said cost-reflective pricing – or “time-of-use” pricing – would disadvantage low-income households who can’t shift their energy use.

“These are households with school-aged children or medical needs living in energy-inefficient housing. They also do not have the financial resources to buy energy-efficient appliances or smart meters to monitor their electricity use, install solar panels or improve the energy efficiency of their home,” she said.

According to the white paper, most consumers will benefit from time-of-use pricing and lower bills. But Roger Dargaville, research fellow at the University of Melbourne’s Energy Research Institute, said it was a “red herring”. Time-of-use pricing would not reduce demand on the hottest summer days, which was driving increases in infrastructure costs that are passed on to consumers.

Dylan McConnell, also a research fellow at the Energy Research Institute, said the paper played down the role of rooftop solar in increasing competition in the electricity market.

“The single largest cost of supplying electricity is the network costs (the ‘poles and wires’) which are regulated, and as such are seemingly insulated from the effects of competition within this paper. Whilst they are described as ‘natural monopolies’ (and thus must be regulated), this is increasingly no longer the case with distributed generation [such as rooftop solar], and particularly the emergence of cost-effective storage,” he said.

“In this context, storage and distributed generation are a direct competitive threat to the network business. Regulating networks on a cost recovery basis makes less sense in the face of such competition. Considering competition here could result in significant cost savings.”

Dargaville also said the paper touts the removal of the carbon price as a good thing for electricity prices, “but for most consumers this modest effect is wiped out by increasing distribution costs and exposure to international gas prices”.

“And of course there is absolutely no mention that the removal of the carbon price has seen carbon emissions rebound and wipe out the gains that resulted from the introduction,” he said.

Right on the gas

Samantha Hepburn, a Deakin University professor who studies mining and energy law, said the paper had “got it right” on prioritising gas projects over reserving gas domestically.

“Artificially low domestic prices [through reservation] do not encourage gas users to use gas more efficiently nor does it encourage innovation in the use of alternative fuels and processes,” she said.

“Domestic gas reservation policies may provide short-term relief to price increases but do not provide longer-term solutions because it does not cohere with broader energy efficiency objectives. Prioritising unconventional gas projects to increase gas supply whilst also introducing national strategy to facilitate some of the core concerns connected with the coal seam gas industry and other unconventional gas resources is a far more effective fix.

“It will not only ensure an increase in gas supply, it will provide greater competition and transparency in the gas market.”

Energy productivity plans

Anna Skarbek, chief executive of ClimateWorks Australia at Monash University, said the plan to improve energy productivity by up to 40% was a welcome first step, but that the United States and Europe are doing even more, and Australia can potentially double its energy productivity by 2030.

“The ClimateWorks Energy Productivity Potential report found Australia could increase its economic output per unit of energy from 24.3c of GDP in 2010 to 47.9c of GDP in 2030 – a 97% improvement. This is the equivalent of a 79% improvement from a 2014 baseline,” she said.

“The report shows about half the potential increase in energy productivity can be achieved through energy-efficiency activities, one-third can be realised by switching from old fossil-fuel generation to more efficient technologies and the remaining potential can be achieved through electrification in the transport and industry sectors.”

While the Energy White Paper recommends improving energy productivity by up to 40% by 2030, Australia had the potential to double productivity.ClimateWorks Australia

‘Ongoing fossil fuel dominance’

Craig Froome, Clean Energy Program Manager at the University of Queensland’s Global Change Institute, said the white paper has done little to boost the hopes of the Australian renewable energy sector, instead focusing on the ongoing dominance of fossil fuels on both the domestic and international markets.

“It appears as though our energy future is to continue exporting our existing fossil fuel reserves at a greater rate to ensure we are an energy superpower, rather than to focus on energy security,” he said.

“While stating the Government is committed to a Renewable Energy Target that will allow 20% of our electricity to be generated by renewable sources by 2020, it also confirms the intention to abolish both Australian Renewable Energy Agency (ARENA) and the Clean Energy Finance Corporation.

“The paper also discusses how electricity generation from fossil fuels will increase in the period to 2040 based on International Energy Agency data to support its approach, but pays only lip-service to the fact that this will represent a decrease in total fossil fuel generation from 68% to 55%.

“Within Australia the paper notes that three-quarters of our coal-fired electricity plants are operating beyond their original design life. With it being acknowledged that a third of our emissions come from this sector, this provides the opportunity to make policy decisions that will really help in investing in Australia’s energy future by incorporating a renewable and sustainable electricity portfolio into the future generation mix.”

What of climate change?

Alan Pears, a sustainability and climate researcher at RMIT, said the paper was “embarassing” and “dangerous” compared to energy policies of other countries.

“The failure to proactively deal with climate policy, when Australia’s fossil fuel production and use comprises almost three-quarters of Australian emissions continues the energy sector’s head in the sand approach. It provides a false sense of security for the fossil fuel industry that will increase future costs and dislocation from change,” he said.