Villain #1 – our Emperors (present, past and would-be) have no clothes

Common sense suggests that a central step in being able to fix a problem is identifying the root cause(s) of the failure in the first place.  However, with the train wreck that’s unfolding before our very eyes (in relation to energy & climate policy) it seems like we’ve collectively been like deer in the headlight:
1)  Firstly, collectively not even able to grasp the fact that the wheels were coming off our electricity-driven engine; and
2)  Then when we (very belatedly) starting awaking to the slumber, we still seem to be incapable of stepping back to sort through the myriad of symptoms to get back to root causes.

(A)  Trigger events

As I write this today, I am forced to wonder (yet again) why it took the South Australian state-wide blackout of 28th September (and also the death of Matt Zema) to trigger an awareness across the broader energy sector that how we were managing our energy transition just was not working, and baby steps towards a better way forward.  Yet even after these two events, a real solution to this crisis seems very elusive…

(B)  A consistent message is emerging?

What began as a few drips more than a year ago has become a torrent of exasperation (but, thankfully, what is a a single core message – albeit at a high level).  Coincident with the AFR’s National Energy Summit in  Sydney today and tomorrow, we’re greeted by the key message “Most AFR readers blame party politics for energy mess in the AFR online this morning:

2017-10-09-AFRonline

I wasn’t in the survey, but I do agree with the message as noted here.  Here’s some other examples in recent weeks:

23rd August On 23rd August, Tom Parry wrote this opinion piece in the AFR making the point that there has been 20 years of bipartisan federal-state failure.
1st September In these comments in the SMH on 1st September, Michael Pascoe notes:

“If you want some clarity about our energy crisis, stay away from politicians and the climate change battle still being waged by the lunatic fringe. Instead, check with the risk managers – the people who have the job of mitigating and insuring against the risks faced by corporate Australia.“

It’s a sad day, indeed, when wise advice is that we should ignore our politicians (our elected should-be-leaders), isn’t it?

 

5th September In this pearler of an article on 5th September in the AFR appropriately titled “Rude awakening for eyes wide shut NEM policy makers”, Ben Potter notes:
“We knew our energy policymakers were asleep at the wheel for a decade until September 28 last year, when South Australia suffered a state-wide blackout. The Australian Energy Market Operator’s advice to the federal government on dispatchable power supply tells us just how asleep they were.”

Unfortunately, my sense is that (until very, very recently) the “we” who knew our energy policy makers were asleep at the wheel and were speaking loudly about it was a very small number indeed.

6th September An opinion piece in the Australian on 6th September by Sid Maher summed it up in the title “Electricity crisis born of broken politics”.
In this Editorial in the Fin Review “The power scramble has to end”, the editor  is correct when he says:
“But rebuilding an industry on the verge of failing, as the government has been warned once again, is not the same as more muddling through.”My sense is that we have been “muddling through” energy & climate policy for 10 years or more at State and Federal Level…
7th September According to this article from News Corp, Waleed Aly had a go at our current energy minister stating that “this is an abject failure of policy”.

My sense is that Waleed is both:
1)  correct, in that the root cause of the failure was policy, but also
2)  incorrect in (my inference) sheeting home this failure to just the current Government, and current Energy Minister (and just to the Federal Government).
Also on 7th September, Innes Wilcox of the AI Group is reported here as calling for policy certainty (in an article quoting a $9b hit for business in electricity and gas cost escalation – truly a train wreck in motion that’s flattening energy users in its path).
Again on Thursday 7th September, Kane Thornton (CEO of the CEC) is quoted in this article in the Australian as saying:

“A decade-long political debate has created a policy vacuum and spooked investors… We need to accept that the energy system is in transition and long-term policy is now essential.”

{nice referencing of our RenewEconomy sponsored NEM-Watch Widget in that article, by the way}

8th September A day later we see this article in the Australian report comments made by our PM-in-waiting Bill Shorten claim that it was due to privatisation.  The article says:

“Mr Shorten used an ABC radio interview to argue that the privatisation of electricity assets in the 1990s had seen the nation lose control of prices and to claim that a “ruthless pursuit of profits’’ by energy companies was hurting the nation.

“There is no doubt that privatisation has been a big problem and I think the debate in Australia needs to recognise that,’’ he said.”

As noted before in terms of wholesale prices, that’s an incorrect reading of the past 20 years.

More generally, this seems just one more example of politicians not really understanding, or accepting, how integrally culpable they all are (e.g. pointing the finger the other way instead).

12th September After a few days of “the Government versus AGL” Jennifer Hewitt wrote:

“The chasm between business and politics is spectacularly obvious in the plaintive calls from the power industry for bipartisan energy policy. Chief executives are wasting their time. Not only will bipartisanship not happen, Malcolm Turnbull’s far bigger problem is getting partisan agreement – from his own party.”

On the same day, Richard McIndoe wrote:

“It’s abundantly clear that the absence of a coherent national energy and climate policy has delivered us to a point where energy costs have soared while energy security and reliability have plummeted. All this without any real inroads to reducing the CO₂ emissions from the sector.”

14th September As another exasperated onlooker, John Hewson wrote in the Guardian here that:

“… neither the government, nor the opposition, has yet produced a believable and deliverable energy policy. That is, a policy to specify the path forward to a low-carbon society, demonstrating a genuine capacity to lower power prices and to guarantee supply..”
30th September Alan Kohler has a way with words, but a particular line at the end of this article made me sit back:

“That 2009 piece of Greens’ idiocy started it all.Eight years later, everybody is still arguing and blaming; soaring gas and electricity prices are threatening recession; and gas producers are having a lovely time, apart from the minor inconvenience of having to schlep to Canberra every other week so there can be a prime ministerial press conference.”

He was, of course, talking about the Greens decision to block Kevin Rudd’s CPRS scheme.

It’s one of the few mentions that that fateful decision has gained in the media (that I have seen).

6th October On 6th October, the AFR published this useful chronology of some aspects of the unfolding energy crisis.

On the same day, three journalists at the AFR here note “five acts” that explain the energy crisis.

Ben Potter also notes here that:

“Chronic indecision around energy policy is bad for energy producers and consumers alike. To restore investment certainty, the nation’s politicians need to join the rest of the country and back the blueprint laid out by Chief Scientist Alan Finkel, the Australian Energy Market Operator, CSIRO and virtually every energy company.

Don’t hold your breath waiting for that one, though!

8th October Finally, in yesterday’s article in the AFR, Mark Ludlow notes that:

“Almost nine out of 10 business leaders say partisan politics is to blame for the energy crisis and that the Coalition and Labor need to find a way to end a decade of inaction on climate policy, according to a survey by The Australian Financial Review.He was, of course, talking about the Greens decision to block Kevin Rudd’s CPRS scheme. 

 

(C)  Our politicians have failed us for 10+ years – and are still failing us

Take your pick, really.

It would be a long, long list of energy sector villains if we were to individually list all of those politicians who have been involved in helping our train run off the rails.  Taken collectively, our politicians really do stand out as Villain #1.  Warren Buffet is often quotes as saying something along the lines of “it’s only when the tide goes out that we find out who has been swimming naked” (in reference to investment strategies).   Well, as I noted in the title above:
1)  Our Emperors (present, past, and alternate) have been seen by all to have no clothes; and yet
2)  Don’t really (even still) show much sign of acknowledging that this is the case.

To put it another way – I really do have to scratch my head to recall a single politician (particularly an Energy Minister) who has actually inspired any confidence in me that they can manage this transition.

I flag one particular episode here to illustrate – I was particularly gobsmacked with Phillip Coorey’s article “No more energy deals with the greens: Labor” on the AFR on 4th September, where the author writes:

“Labor says it could never do another deal with the Greens on energy because any new policy must be durable enough to survive a change of government so it can guarantee investment certainty.”

… so far, so good I think (not because they won’t do a deal with the Greens, but because it seems to suggest that Labor understands the need for durability).  The article goes on:

“But shadow energy minister Mark Butler stressed the investment strike in the energy sector, which was driving up prices and increasing supply volatility, would continue so long as the major parties continued to disagree.”

Again, encouraging – but then here’s the quote:

“ ‘All stakeholders have advised Labor that a bipartisan approach to national energy policy is crucial,’ Mr Butler told The Australian Financial Review.”

Say what?  Did you need to be advised of something so basic as this in order to join the dots?  Gives me no confidence Mark actually understand some of the fundamental drivers that are behind this train wreck.  I highlight this not particularly because it relates to Mark, but moreso because many politicians seem to still view (despite all the evidence) that they can use some permutation of energy policy for political gain

And that’s the root cause… though, as noted here [LINK TO COME] there seems to be a corresponding reason why this is the case.

As I noted in my presentation back at the Clean Energy Summit on 19th June, I have a very pessimistic view that we are really going to see a change in the approach taken by our (supposed) policy makers any time soon…

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4 responses to “Villain #1 – our Emperors (present, past and would-be) have no clothes”

  1. observa says:

    The debate over Catastrophic Anthropogenic Global Warming (CAGW) aside, once policy makers were in agreement about that, they had to ask the hard question- What does it take to replace a megawatt of despatchable thermal power with a megawatt of despatchable wind or solar power? That assumes that tidal and geothermal were way up the cost curve and the obvious rider to the dollar cost answer was how much CO2 would be saved anyway?

    Instead we simply had massive wind and solar generator rollout with no thought given to their fickle and unreliable nature, but at the same time bankrupting thermal coal power (not so much bankrupting them immediately but drawing down on their sunk cost with no margin for depreciation and reinvestment)

    • metro70 says:

      It wasn’t a matter of ‘no thought’-it was with malice and aforethought…that thermal coal power has been killed off.

      That was the pre-requisite…that COAL be killed off as a future electricity generator but be forced to hang around as long as needed so the RE industry can use it and gas to pretend that wind and solar can power a modern industrialised society.

      By the time the whole world and the general population finds out that wind and solar …even when supported by batteries and pumped hydro…is unsustainable for the continuation of a modern society…the uber-rich generators will have made their squillions and moved on.

      Ask yourself why Germany with infinitely more RE …trillions spent…nuclear power still…connectors to French nuclear power…can’t survive without COAL…and is building new brown coal plants even as they claim to be getting out of coal.

      And then ask yourself what sort of madness is it that makes Australia…with no nuclear or huge hydro to fall back on…no connectors to other wealthy nuclear-powered countries… prostrate itself before the carpetbaggers and allow them to make us the ONLY first world country that’s offering itself up for sacrifice at the altar of a LW CAGW hoax.

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