Electricity affordability more crucial than carbon reduction: Frydenberg

//Electricity affordability more crucial than carbon reduction: Frydenberg

Electricity affordability more crucial than carbon reduction: Frydenberg

20 July, 2017

Matt Chambers

Courtesy of the Australian

 

Federal Energy Minister Josh Frydenberg says electricity affordability has become more crucial than carbon reduction, as stories of energy hardship mount and gas export restriction is set to play a critical role in easing prices.

Mr Frydenberg also warned that even if the Coalition party room can overcome differences on the Clean Energy Target, there remains a “major chasm” between Government and Opposition policies on tackling climate change.

Speaking at The Australian/Melbourne Institute’s Economic and Social Outlook conference on Thursday, the Energy Minister said prices were the priority in solving an “energy trilemma” of high prices, carbon emissions and system unreliability.

“Unequivocally we are focused, right now, on affordability,” he said.

“We are getting daily hardship stories from the street, from regional communities, about the impact of higher prices is having on business. This is really hitting home.”

Wholesale and retail power prices in the National Electricity Market are surging and reliability is falling as coal-powered generators close, gas prices have tripled in recent years as exports ramped up at Gladstone and the proportion of less-reliable wind and solar power has increased.

Speaking at the same session, Opposition energy spokesman Mark Butler said the east coast — which the NEM serves — was in a “full energy crisis” that was largely self-inflicted by “one of the biggest public policy failures of the past 20 years.”

Mr Frydenberg said Malcolm Turnbull’s recently acquired powers to restrict gas imports, if there was a shortage of reasonably priced gas, would play a big role in driving down gas and power prices.

“We’ve introduced export restrictions on gas and that is going to be critical in driving down our generation costs in the immediate term,” he said.

While the ability to restrict gas exports controls was put in place this month, raising concerns about Australia’s reputation for honouring export contracts, Resources Minister Matt Canavan has yet to declare whether they will be activated this year.

Mr Frydenberg said gas, as the most expensive form of reliable power generation, set the electricity price in the National Energy Market 24 per cent of the time, up from about 9 per cent previously.

While the Australian Energy Market Operator has overturned February forecasts of a looming short-term gas shortage after more information from gas producers, Mr Frydenberg said prices were still too high.

He said he had spoken to a small business in regional New South Wales that had been offered contracted gas at $16 a gigajoule, which is up from traditional prices of $3 to $4.

“That is just out of this world and enough to break businesses,” Mr Frydenberg said.

He said the goal was to get contract prices close to “LNG netback” or the effective price that Gladstone’s exporters get for LNG before liquefaction and shipping overseas.

The price goal was about $8 to $10, Mr Frydenberg said.

Mr Butler said time was running out to get bipartisan support on energy policy as the Coalition party room remained unable to come to agreement on the CET proposed by Chief Scientist Alan Finkel in his blueprint to fix the energy crisis.

“If this opportunity slips for the two major parties to achieve a bipartisan position on energy investment during this Parliament, it may not come back for a number of years,” he said.

But Mr Frydenberg warned that Labor’s position that it could agree to a CET, over its policy of an Emissions Trading System, did not mean it would agree to what the Coalition came up with.

“Don’t think for a moment, even if we (the Coalition) were able to resolve the clean energy target, there wouldn’t be a major chasm between the Labor Party and the Coalition on how to tackle energy and climate policy,” he said.

The chief divide was Coalition policy of reducing emissions by 26 to 28 per cent from 2005 levels versus Labor’s policy of 45 per cent reduction, which could mean disagreement on where a target was set.

“Finkel explicitly says if you were to try to remove more than 26 to 28 per cent of emissions out of the energy sector in that time frame, it is going to have a negative impact on prices and security,” Mr Frydenberg said.

2017-07-21T15:59:05+00:00 July 20th, 2017|