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Reaching for an answer while dealing with fools

Tuesday, 28 November 2017

Nick Cater writes in The Australian:

If you have a wacky cause to promote in the national capital, Shane Rattenbury could be your man.

Rattenbury, a Greens representative in the ACT’s Legislative Assembly, jumped on Facebook on Saturday to support #BuyNothingDay, the latest way to signal one’s virtue, and one which is every bit as daft as it sounds.

“Canberrans have a problem with stuff,” Rattenbury pronounced. “Reducing the impact of our consumption needs to be a long-term goal for all Canberrans — so start today by buying nothing new.”

Rattenbury’s CV offers scant evidence that he has ever worked for an employer that needed to make a profit. He worked briefly in the public service before taking up a whale-hugging job with Greenpeace.

Perhaps the trauma of January 2006, when he stood on the bridge of the Sea Shepherd as it collided with a Japanese whaler, got to him. Who can tell? Suffice to say he ­appears to suffer from a delusion, all too common in Canberra, that businesses make nothing but trouble, and governments put things right.

The mega-blunder in energy policy suggests the opposite is the case. In an attempt to solve this government-induced crisis, Josh Frydenberg invited his fellow energy ministers to join him around a table in Hobart last Friday.

Since the ACT government doesn’t have an energy minister it sent Rattenbury, its Climate Change and Sustainability Minister. We assume, incidentally, that his sustainability mandate doesn’t extend to Canberra’s retail sector, but in a city where median household income is 40 per cent higher than in the rest of the country, they are sure to muddle through.

Rattenbury might have been friendless in Hobart were it not for South Australia’s Tom Koutsantonis, who, like Rattenbury, had signed up to #BuyNothingDay, nothing at least that Frydenberg wanted to sell.

Things got off to a bad start for the pair. At a gathering the night before, energy retailer Powershop backed Frydenberg’s ­National Energy Guarantee.

Powershop, lest anyone should doubt its sustainable credentials, was named Australia’s greenest power company two years in succession. By Greenpeace, no less.

Powershop is hardly alone in recognising the energy market shambles needs fixing, and that Frydenberg’s guarantee is worth a shot. Others on board include the Australian Council of Social Service, the Brotherhood of St Laurence, the St Vincent de Paul Society, the World Wildlife Fund, the Clean Energy Council, the Energy Efficient Council, the Australian Energy Council and the Investor Group on Climate Change. Even the ACTU signed a letter of support, although by Friday it was crab-walking away from it, with a weasel-worded press release that demanded “more detail”.

Naturally we await the detail, because the NEG is a work in progress. If the plan had emerged fully formed on day one — like Kevin Rudd’s plan to insulate your roof, for example — we’d know we were in trouble.

Instead, Frydenberg is doing things the old way, inviting feedback and negotiation, as indeed he must if he is to clear the many hurdles Australia’s federated governments put in his path.

First he’ll have to persuade every member of the COAG ­Energy Council, which includes Rattenbury and Koutsantonis, to put aside parochial grandstanding and adopt a national plan.

A bill will have to pass through the SA parliament. At least four commonwealth acts need amendments. And somewhere along the way, Frydenberg will have to win the support of a sceptical partyroom. Assuming, that is, the government survives the witch-hunt against closet Greeks and Poms.

The SA and ACT governments will not easily be persuaded. Both have invested considerable political capital in the fiction that their states can get by with renewable energy alone and still be wired to the east coast grid.

That fiction is exposed on the frequent occasions SA is forced to import electricity through the Heywood interconnector. Stopping brown and black electrons coming over the border is harder than stopping the fruit fly.

Frydenberg may not have won over some conservative commentators, one of whom dismissed his proposal on these pages on Saturday as “a complete crock”.

That is not how it looks in the green jurisdictions, where dreamers and schemers who have been freeloading off subsidies paid by electricity customers across the country realise that if Frydenberg gets his way, the game is up.

They can set their vanity renewable energy targets at 110 per cent, for all it matters; once the federally mandated subsidies dry up, it won’t mean a thing.

The truth, seldom expressed, is that state and territory renewable targets have not created one extra windmill or one photovoltaic panel. They have simply grabbed a larger share of the fixed pie of renewable investment, supported by subsidies, explicit and implicit, created by the commonwealth.

True, the green jurisdictions have added some sly subsidies of their own, but these are likely to backfire once customers realise that they’ve been taken for mugs. Subsidies don’t grow on trees, even in the ACT, which has so many that it is cutting them down to make way for a tramline to Gungahlin, population 6134, according the census. Don’t laugh, we’re paying for that folly too.

The prospect of electricity prices coming down is particularly bleak for the ACT, where the government has signed contracts with the suppliers of renewable energy at a fixed price — plus inflation — for up to 20 years.

They have used a mechanism called Contract for Difference, which in Britain is classified as a subsidy, since it underwrites the value of sunk capital and guarantees a return on investment.

It’s a dream deal for investors, if they can find a government naive enough to buy it. It may be a useful tool for commercial hedging, but it’s nuts for a government to mortgage its energy future to such a scheme.

What if the cost of renewable energy comes down, as its advocates tell us it will as technology gets better? What if the wholesale cost of electricity is reduced, as it just might if Frydenberg’s powers of persuasion are as good as his Prime Minister thinks?

It won’t make a jot of difference in the ACT, where they will be paying 2017 prices until the whales return to Lake Burley Griffin. The ACT — to use Terry McCrann’s words — has bought nothing but a complete crock.

The MRC’s report, Rebooting the Energy Market, is published on Friday.

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